At the end of February, ServiceNow announced that Frank Slootman would be stepping down from his role as CEO after six successful years and would be handing the role over to ex-eBay chief John Donahoe.
This marks a critical point for ServiceNow. During Slootman’s tenure he successfully managed to scale the cloud company to a $1.5 billion business, as well as diversify the product set, allowing the company to sell to almost all lines of business outside of IT.
ServiceNow is aiming for $4 billion in revenue by 2020, just three short years away. The name of the game is scaling even further and getting the ServiceNow platform more deeply embedded into enterprises.
Donahoe has a good track record of scaling businesses, albeit in the consumer world. During his time as eBay chief he more than doubled revenues to $18 billion and increased the company’s market value by 250% to $80 billion. A success he’s no doubt going to be looking to replicate at ServiceNow.
We at diginomica got the chance to have one of the first conversations with Slootman and Donahoe about the changing face of ServiceNow and what it means for the future of the company. If you’ve read my previous articles, you’ll know that I’ve got a pretty optimistic view of the platform’s opportunity - if it can deliver on the execution - given that it enables enterprises, in all areas, to rethink processes and automate on service (in other words, it’s not just lipstick on the pig).
My first question for Slootman is: given the success he’s had manning the ship, why the decision now to step down? He explained that the change in leadership hasn’t been a short-term one. Slootman recognised the change in direction for the company (shifting focus from solely being IT to the wider enterprise) and has been working with the board to find a replacement that could deliver on those changing needs. Slootman explained:
It was not a time based event. We started almost two years ago with conversations at the board level about us knowing that at some point we were going to come to this point and we’d like to take a very pro-active, very strategic, very thoughtful approach. As opposed to having our hands forced, having to do something in a very short period of time.
In that whole discussion, time was not an issue. We said we weren’t going to do anything until we found somebody that we had conviction around and who represents really what we want to do and where the company is going to be. We are were optimising for the succession and not for the time frame.
Our company is rapidly evolving from being a very IT-centric company. We were really the CIO system, [but we are now] tapping into service domains that are not IT. For example, human resources, customer service, security, and general business applications that are line of business. Our conversation, our narrative, needs to evolve from being IT-centric to being enterprise-centric. We needed to learn to speak to CEOs, CFOs, really the entire C-suite.
So when we were looking for a CEO we didn’t want to find another guy like me that spends his whole life dealing with IT people. This is a very bold, deliberate, purposeful move on our part to say that this represents where the company is going to go, where we want it to go collectively. That’s what John represents to us.
Bringing the consumer experience
ServiceNow believes that Donahoe’s tenure at eBay, a consumer focused company, will bring valuable experience to the enterprise software company. Slootman said that the number one conversation he has with CIOs nowadays is no longer about cost, which is what it used to be, but about the need to bring the enterprise experience in line with the consumer experience.
Slootman added that whilst IT buyers may be tolerant of an enterprise IT, or “industrial”, experience, other lines of business will be less forgiving. This is an area that ServiceNow intends to focus intently on. Slootman said:
The new businesses that we have entered are forcing us down that path. And we’ve done a lot over the past couple of years. But we need to become fanatical and obsessed. Software is going to be consumed at the very top level of the stack, meaning that people are only interested in: what does this look like? What does this feel like? What is the experience? The entire stack below that, they’re going to be increasingly disinterested.
Donahoe agreed and said that his experience at consultancy firm Bain, where he spent more than 20 years, will help him in discussions with the C-Suite about transformation, whilst his time at eBay will drive this experience agenda at ServiceNow. He said:
I know, having been a CEO at eBay, what ServiceNow can do for an enterprise. It helps transform how it operates. With respect to consumer and enterprise, the lines between the two are blurring. For the simple reason that, if you think about us as consumers, cloud-based applications like eBay, PayPal, or Airbnb - they change what consumers expect out of their technology experience. Simple, intuitive, mobile, always on.
And increasingly that’s what is going to be expected by consumers in the workplace. Consumers are employees, employees are consumers. There is a lot of opportunity and need for enterprise software to drive more consumer-like experiences for the customers, for the employees of its customers.
When asked what his greatest achievements were during his time as CEO at ServiceNow, Slootman speaks about delivering on the opportunity that the founding team created - in terms of scaling from $75 million to $1.5 billion in six years. Equally, Slootman adds that he is also very proud that ServiceNow is prepared for its next phase of growth, up to $4 billion in revenue, thanks to having diversified into a number of products, markets and channels.
Slootman said that the products that ServiceNow now has, the ones outside of its traditional IT market, will “become $1 billion businesses in their own right”.
Donahoe agreed, and said that his focus now will be on learning from customers and employees, and executing on the next phase of growth. He said:
I’m very aware that this company has got a lot of momentum. But my job is to ensure that we don’t miss a beat through this succession. And that we continue executing on what we’re doing right now. And I feel very good, even after one week, about the organisation’s commitment to do that.
That frees me up to do a lot of listening and a lot of learning. That will start with customers. I intend to spend a good part of my first couple of months out talking with customers, with potential customers. Really getting a robust understanding of their current experiences using ServiceNow, but also where the future opportunities are and where the needs are.
My focus will be on what are the things we can do to enhance our ability to get from $1 billion to $4 billion. But also to continue the tradition that Frank has set of thinking about the future, thinking about how we get from $4 billion to $10 billion.
The potential of ServiceNow
I’ve written before that ServiceNow could be the platform to beat in the enterprise cloud market, given that it has the ability to touch all corners of an organisation and gives companies the opportunity to rethink their processes and how they operate.
Slootman alluded to this during our discussion this week, where he said that ServiceNow is “not just a moderniser”, like some other Software-as-a-Service platforms. He said that a lot of successful cloud companies out there still give enterprises very similar outcomes, where people have very similar jobs, but with a more modern system and experience. Whereas ServiceNow, according to Slootman, has the potential to be a full enterprise ‘transformation’ platform.
However, more interestingly, Slootman believes that this gives ServiceNow the ability to capitalise on the future of how enterprises operate, specifically with regards to automation and artificial intelligence. He said:
Historically machines were there to help people do their jobs. That paradigm is being inverted, because machines are starting to do the jobs and people are there to support the machines. What that also means is that we are going to a lights out, light speed environment.
In other words, departments, enterprises, institutions, are becoming clouds themselves. It’s a full on software execution model, not a people execution model. That is happening at all kinds of levels. Retailing is now really a cloud experience. Banking is a cloud experience. For us to help enterprises achieve that state is what we are about.
We are finding ourselves at a very strategic point in time, where we are at the tipping point where that model is flipping over. That is a really big thing that’s going to be underpinning the economies of the future. It will take time, but that’s the place that we are as a company.
I suggested to Slootman that perhaps a lot of the discussions around AI and machine learning are simply rhetoric at the moment, and that buyers weren’t yet implementing these technologies to any significant measure. He disagreed and said that enterprises will go after these technologies aggressively because they allow for a removal of a huge cost base - labour. He said:
It’s absolutely on their minds right now. I’ll point you to the obsession with machine learning, deep learning, artificial intelligence. Why is that? That’s because they want the machines to make the decisions, not the people. It’s not that AI is an interesting idea in general, or in the abstract, it’s specifically in the context of disintermediating processes. Banks are looking at stripping out billions and billions of dollars out of their cost base, and that takes radical approaches. That’s the final frontier in enterprises - go after the staffing.
If we take the societal implications and politics out of Slootman’s final point above, you can clearly see the direction and impact that ServiceNow could have on the cloud market. It’s a company that’s growing quickly and it’s one that buyers are beginning to understand in greater detail, as it moves away from its focus on IT discussions. Donahoe’s aim will be to embed this platform in the top enterprises out there and make sure it reaches all corners of those enterprises. He needs to make people understand what ServiceNow does in its simplest terms: it automates an enterprise’s services.
Good luck to Slootman and we look forward to watching Donahoe’s progress during this next chapter for ServiceNow.