The government sector is turning into a strong sweet spot for ServiceNow as the firm ties up with Microsoft to deliver its digital workflows via Azure Government Cloud.
ServiceNow CEO John Donahoe explains:
This alliance is designed to help federal agencies move faster and securely to cloud-based solutions. Just as we've seen in the private sector worldwide, digital transformation is becoming a public sector imperative and we are deeply committed to being a preferred strategic partner helping governments modernize, drive efficiency and deliver better experiences for employees and their citizens.
He adds that the most recent fiscal quarter saw an escalation in government business overall:
The US Federal Government represented our biggest deals in the quarter, accounting for a fifth of our total net-new ACV (Account Current Value). This was our largest federal quarter ever. For example, the US State Department is now our largest platform customer. We're becoming a critical strategic partner to the US Federal Government as it modernizes its IT infrastructure and moves to cloud-based services and platforms.
The uptick is a result of longer term investment, says Donahoe:
In the US Federal sector, the good news is ServiceNow has been investing in this sector and in this team over the last several years. We have a dedicated sales team in Washington with a lot of resident expertise there. I was in Washington for a full week, literally across multiple federal agencies. They're looking for their own equivalent of digital transformation and they view our platform [as enabling that]. What's fascinating is they perhaps even more than the commercial sector start with our platform and the power of the platform.
So the State Department deal was fundamentally a platform deal and then ITSM [IT Service Management] and other products [were added] on top of it. One of the military services is using our platform in some very creative ways to look at how they on-board their soldiers, how they move their soldiers around, how they off-board over time.
The potential for growth in government isn’t restricted to the US, adds Donahoe:
In my travels over the last year, I've met with governments now in three continents, multiple countries, federal, state and local. A couple of things are clear. I think initially when cloud came around, governments were a little bit suspicious and maybe a little bit slow to embrace it for security concerns, for the newness factor. I will tell you that's changing.
Governments are under pressure to deliver efficiency and deliver better citizen experiences and to do that in a safe and secure way and they now recognize cloud is an important enabler of that…In Australia, and same thing in the UK, some of the State and regional governments are using our platform in some really creative ways. For instance, one of the port authorities that also oversees the busting system is talking about how they're delivering better end-to-end experiences both for the packages and for the people using the ServiceNow Platform.
Away from the public sector, ServiceNow continues to add customer logos to its roster, boasting:
- 614 customers doing more than $1 million in business.
- 11 customers doing more than $10 million, almost triple the prior year.
- More than 5,000 enterprise customers.
The firm continues to drill down on driving customer success, says Donahoe:
We're driving customer success to be a natural extension of our sales motion and are committed to both landing new customers and expanding our existing customer relationships in a healthy and sustainable manner. And our customer success approach is paying dividends. For example, our customer success team helped land a significant deal with a European Fortune 200 financial institution in the third quarter. This team showed how we can help enable and deliver key elements of their transformation initiatives and drive successful business outcomes.
Digital transformation is no longer a business buzzword. Digital transformation is an essential strategic need for virtually every customer that I'm meeting with and it is just stunning the consistency around that. In simple terms, it's software that's disrupting every company and every industry and every geography. Every company wants to digitally connect with their customers. They want to provide a better digital experience to their employees and they want to use digital technology to drive productivity and efficiency so they can dedicate their talent, their capital [and] scarce resources to innovating for their customers and not getting consumed in the complexity of running a global enterprise.
I hear that literally in every interaction. Actually, it's commercial and governments. So, digital transformation absolutely is at the top of the investment priorities of companies and I don't think it's driven by tax reform or even macro-economic factors. I think it's more strategic spend. So we feel ourselves in the middle of that strategic spend.
I’ll give an example. I was at a large Fortune 50 consumer products company. Growth in consumer products companies is not huge, so productivities become very, very important. They said, ‘We've done the easy cost reduction. We've done the easy. Now, we need to drive productivity, healthy productivity. This is the head of their business shared services group which is a highly empowered group across their divisions. And he said, ‘We view streamlining, simplifying, and automating workflows across our large global entity [as] the source of highly positive, highly healthy productivity, that includes employee experience and helps reduce costs’. And he said, ‘We've looked around and we view ServiceNow as a core strategic partner and core strategic platform in helping us do that’.
ServiceNow continues to impress Wall Street with its growth. The expansion of its footprint in the government sector is an encouraging development and it will be interesting to see if the success in the US market can be replicated around the world.