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Interview with ServiceNow CEO Frank Slootman - The ‘everything-as-a-service’ revolution

Derek du Preez Profile picture for user ddpreez May 19, 2016
Summary:
We got the chance to interview ServiceNow CEO Frank Slootman from the company’s annual Knowledge conference in Las Vegas, where he spoke about scaling the company to $4bn by 2020.

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Frank Slootman

Any task that is repeated frequently within an organisation could benefit from being streamlined into a service architecture, rather than relying on ad hoc or clunky processes. You see it every day in the consumer world, your smartphone is full of services that used to require more manual intervention. Walking onto the street and hailing a cab is now simply just a couple of taps on an app.

But enterprises have been slow to realise the same applies internally, with employees (and customers) having been left to use workarounds, email and phone calls to get tasks done. When actually, a service-based architecture can strip all this out for you.

That’s exactly what ServiceNow does for companies - which is why I’ve said that it could well be the platform to beat in the cloud wars. Whilst ServiceNow started in the IT department, given it is based on the ITIL framework for IT Service Management, it has a play in almost all corners of an organisation.

Can it benefit from a service? ServiceNow can probably help. Which is why the company now has a play in HR, security, field service, marketing and now customer service. ServiceNow CEO Frank Slootman calls it the “everything-as-a-service revolution”.

And he could be on to something, given that ServiceNow was the second pure play cloud company to hit the $1 billion annual revenues mark (after Salesforce).

I got the chance to speak to Slootman from the company’s annual Knowledge user event in Las Vegas this week, where he spoke to how companies are starting to wake up to the fact that they can’t continue to have processes that are decades out of date, when compared to the consumer landscape. Slootman said:

The revolution is really between people’s ears and not so much in the software. The technology is here. Our ability and our fortitude to apply the technology, not as much. I always think that people don’t change easily or often voluntarily. There needs to be a catalyst that makes them change.

If you look at your life as a consumer, it’s taking off like wildfire. Everything is a service. Then you go inside the enterprise and you’re twenty or thirty years in arrears. We’re still seeing departmental envelopes. We still see PDFs. We see help desks where you have to call and email. It’s very backwards. The enterprise hasn’t had the same impetus as the consumer side, because the consumer side is scale and it’s the only way to reach people.

They were forced down that path, both from an operational and economic standpoint. Inside the enterprise they’ve been able to hang on to very old ways of doing things. And that disparity is becoming a pressing problem for CIOs, because they look stupid. You’ve got young people going into these companies and they’ve got to go back in time to learn how to work there.

Taking on customer service

This week at the company’s Knowledge event, it announced a new application that will push ServiceNow into customer service teams, which is a direct challenge to the incumbent providers Salesforce and Oracle.

So what makes Slootman think ServiceNow can take these companies on? What does ServiceNow offer that the likes of Oracle and Salesforce don’t? His pitch is that ServiceNow provides the capability to more closely integrate the raising of an issue to the resolution of that issue, by connecting departments, systems and workflows. Instead of a customer service team taking in complaints and then ‘throwing them over the wall’ without any insight into what’s going on, ServiceNow provides the capability to connect all these different silos up and follow the ‘service’ all the way through to resolution.

Slootman said:

All of the companies in customer service, Oracle, Salesforce, etc. - all they do is engagement. They really have no service model that holistically pulls in the engineering and operational pieces. That’s sort of our heritage, that’s our unique DNA, that’s our differentiator angle of coming at this space.

We didn’t wake up one day and decide ‘oh wouldn’t be cool if we did this’ - we have customers that are beginning to move in this direction. Engineering and operational processes have to be very closely linked in to the customer engagement process. It’s super important. Not just for their service model, but so that they can help customers out and making sure that future customers aren’t encountering the same problem.

We think that these processes are completely disconnected. In most institutions and enterprises things get thrown over the wall when the noise gets loud enough. It’s the unique heritage of the IT service model, we are trying to repurpose for other walks of life.

Interestingly, Slootman said that ServiceNow already has half a dozen customers that are live with the application, most of which had been using home-grown or legacy systems. Even more interesting, he added that most of the customers using the product weren’t ServiceNow customers already, which Slootman describes as ‘surprising’. He thought the low hanging fruit would be his existing customer base, but according to him, there is appetite for the customer service tool outside of that.

So where next for ServiceNow? It has well and truly been pushed outside of the IT department, but is there anywhere that Slootman thinks wouldn’t be suitable for the product? Not particularly, it seems. Any repeatable task is suited to a service. He said:

Any service domain is sort of fair game to us, we see large enterprises reconceptualize themselves in terms of organising their service assets as one thing. Then all the organisations, systems and people that request services on the other hand then have this enterprise-wide service integration layer that brokers all these transactions.

Because they want to have a standard way of doing it - they want to have a standard way of conserving services, they want to have a standard way of reporting and analysing, they want to be able to monitor it in a certain way. So instead of having everything on a one off basis, they want to have an enterprise-scale view of managing service. They start to reconceptualize everything ‘as-a-service’.

Scaling the platform

At Knowledge last year, Slootman took to the stage during his keynote and said that in the future he

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Crowds at ServiceNow's Knowledge conference in Las Vegas

wants ServiceNow to be a minority seller on its now platform. And you can see the appeal - by creating an ecosystem of companies based on ServiceNow, Slootman can sit there and take a cut of all the business taking place.

So I was keen to find out from him how the platform (and the ecosystem) are developing. Is he seeing the traction there that he expected? Whilst he said that scaling is still a big challenge, the company has done work to shift the focus from administering the application, to application development. The company is also a year and a half into a UI revamp project and has worked hard to introduce strong governance structures.

Slootman added:

There has been a bunch of inflections. Our two largest partners were acquired last year. One was Fruition Partners, which is now part of CSC. And then our other major partner, Cloud Sherpas, was acquired by Accenture. Accenture is now our single largest accredited partner and has the largest number of accreditations, in terms of people certified. So we see that as an inflection. We have 170 partners at the conference this week. We had our first $1 million sale through the store - we have a ServiceNow store were partners sell applications and integrations. Our community in terms of value add services and products is pretty dynamic.

Slootman was also happy to speak about the growth trajectory for the company. Having reached the $1 billion revenue mark, ServiceNow has said that it expects to hit $4 billion by 2020. But this comes with a number of challenges, that Slootman is all too aware of.

He said:

We are in a transition from being a single product, single market, single channel company to one that’s fully multi-product, multi-market and multi-channel. We are going from $1 billion to $4 billion in 2020 - we have to mature as an organisation and as a franchise to be very comfortable in this multi-product, multi-market, multi-channel mode.

And we started that a year and a half ago, but we are up to our eyeballs in really evolving that way. It’s every aspect of our company. It’s our executives, it’s our systems, it’s the membership of our board of directors. Everything is an evolution and I’ve got a lot of irons in the fire, and I’ve got to make sure they get hot. You’ll see us make acquisitions, you’ll see us enhance our products, deepening broadening them.

I noted to Slootman that it’s surprising that ServiceNow doesn’t have as strong a brand presence as the likes of Salesforce and Workday do, given its strong position in the market. He acknowledged that this has been a discussion internally at the company and said that ServiceNow could do with having a stronger profile in the market. However, this isn’t easy. He said:

I think we have internally acknowledged that. I think how to do that is not so trivial. I mean, you’ve got cloud companies out there running ads on TV - you’re not going to see us doing that any day soon. We are an enterprise software company, not a consumer audience. We struggle with the same problem Cisco has, people don’t understand what Cisco does either.

And his biggest challenge of all? Finding the right people. Slootman said:

Talent is the number one concern that companies like us have. I can certainly find people with a pulse, but we are talent constrained. I’m sure Salesforce and Workday will tell you the same thing. Talent is what holds the world back at this point in time.

Our hiring is out of school now. We are trying to get them earlier, younger. The people coming out of school, that’s often where the emerging talent is, so that’s where you need to go. I think all great companies know that’s where you have to be, you have to get there early. You’ve also got to retain the talent, which also isn’t easy. So you have to create a great environment and career path for them that makes them want to stick around.

My take

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I always find Slootman very frank in his discussions, where he doesn’t speak in marketing jargon and has a clear understanding of the market and the challenges facing companies out there. He’s grown ServiceNow from a $100 million business to a $1 billion business in five years. And I’d be surprised if his predictions for 2020 aren’t accurate, given the growth we’ve seen at the company.

ServiceNow benefits both from land and grab, where companies are pushing the product out of IT into other areas of the business, as well as finding new customers that are just interested in HR, security or customer service, for example.

I’ve noted before that I think ServiceNow has a challenge in marketing itself as a business solution, as ITIL and ITSM have traditionally been perceived to be a very technical discussion. For ServiceNow to become pervasive, it needs to really sell this message of ‘everything-as-a-service’ and get companies to understand why it has an impact on business outcomes.

That being said, I think for a company that has largely been operating under the radar, it shouldn’t be underestimated.

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