Every company is a 'platform' nowadays. There's no getting away from it. The idea of owning a bunch of profitable businesses that use your underlying platform, whilst you sit there and take a cut, is hugely appealing.
In fact, during CEO Frank Slootman's keynote address at the ServiceNow's annual user event in Las Vegas this week, he said that he wants ServiceNow to be a minority seller on its own platform. It is something that he and the company are aiming for.
And in reality, there isn't going to be one winning platform in the cloud software industry. There's going to be a few. However, I believe that ServiceNow has a competitive advantage over the rest, in this space, for one big reason – service management can touch every part of the organisation, without it having to focus too much attention on specialising or making huge acquisitions.
It is evident that much of the software industry has adopted a strategy whereby companies have carved out a niche for themselves in a certain area – e.g. Salesforce (CRM), Workday (HCM) – and then have slowly started expanding into new business areas that compete with their cloud rivals. We are now also seeing these companies investing in creating industry specific suites.
And whilst many would look at ServiceNow and see it doing something similar, having started out as IT Service Management, and now branching into HR, legal, and other lines of business; what's different is that ServiceNow isn't asking you to rip out your existing system of record, it doesn't want you to remove your SAP or your Workday systems.
It wants you to use ServiceNow to 'servitize' all of your processes, structure your workflows and tap into these systems of records to become the single version of truth across the enterprise. This is why its platform is compelling. The ServiceNow platform keeps all of the fundamental elements of service management, regardless whether or not it is doing a new line of business or new industry vertical – it has the potential to touch all areas, whilst still allowing you to invest in other 'best of breed' applications.
It connects the dots between all of your applications and back-end systems and provides a structured process that delivers everything-as-a-service. And as we have seen in the consumer space, good services are hugely appealing.However, in my opinion, this message isn't yet being portrayed as well as it could. Sitting through the keynote this morning, and then a couple of press briefings and a few customer sessions, it became apparent to me that the concept of 'servitizing' your processes and introducing structured workflows isn't the easiest concept.
The new layer of service needs to be showcased in a way that presents the business opportunity, rather than as some abstract technical concept. I have seen far too many complex workflow diagrams today. It is likely that given ServiceNow still has a heavy focus on ITSM, it has got used to selling a technical message and speaking to a technical bunch of people – but if I was a CIO, CMO or CFO listening to a lot of the stuff today, I wouldn't immediately 'get it'. And that needs to change.
However, despite this, I still believe that because of ServiceNow's potential to reach all corners of the enterprise, through the use of the common elements of its underlying platform, it could be the one to beat in the next five years or so.
But let's dive a little deeper and take a look at the content that was pushed out on the first day of the event. It all kicked off with CEO Frank Slootman's keynote, where he spoke about how in the consumer world, services like Uber and OpenTable are winning out because of their exemplary service capabilities, which are delivered at scale.
This is what ServiceNow hopes to bring to the enterprise, which has up until now traditionally focused on using emails to chase and fix broken processes and relied on manual inputting of data into systems that are supposed to be digital and automated. He said:
On the consumer side, it's just gone nuts, it has just been an explosion of services. The reason that the consumer side exploded so much on the service front, is because they really had to. There really is no other way to reach the audience. The service experience with things like Uber is so good, so compelling, and that's why you get the level of adoption.
What's different now [in the enterprise], is that we are moving to structured workflow approaches. It's really different, that's what it means to have everything as a service. The reason that we are constantly messaging back and forth is that we are trying to sync up my truth with your truth, we are constantly seeking information. That's what drives incessant messaging. Now we are all referencing the same data, we don't have to talk to each other.
Slootman gave an example of an employee requesting a new mobile phone, which traditionally may have been
done by emailing IT, which then emails back a form, which is then filled out and emailed back. Emails are then sent back and forth chasing the request, etc. Whereas using ServiceNow, the employee could just fill in an online form and then receives notifications and updates on the progress, whilst the IT department can automate those requests and have real-time data on how each of those requests are doing.
Structured workflow is here, it's coming, it's moving in all kinds of different places. A lot of structured workflow in the enterprise world comes from IT, by necessity, because of the sheer volume and complexity. The same thing in parallel happened on the consumer side. But where it's going to go over the next five or ten years, will be business services; HR, marketing, legal etc. These are not businesses that support the business, these are services that ARE the business.
“This is going to become one mega-market for constructing and standing up services. So with everything as a service, we are going to be speaking less about ITSM, we are going to be talking more and more about service management. That's going to be an enterprise discipline, it is going to become as common as ERP, CRM and HCM. It's going to become a class of software that's going to become very dominant.
Again, to my earlier point, this is the message ServiceNow should be drilling home. Service management, on the ServiceNow platform, is a new class of enterprise software – and it's potential is huge because it sits across all other software assets and ties everything together. Well, that's the idea anyway.
And with predictions that ServiceNow could reach $4 billion in revenue in the next five years, the opportunity is big.
Going back to its platform rootsPat Casey, ServiceNow's SVP of platform engineering, also provided us with some deeper insights into the potential of the 'everything-as-a-service' platform. He said that ServiceNow is likely to win in this space for a few reasons, which include:
- ServiceNow was built as a platform business from the start. It hasn't had to reengineer to become one, it wasn't an afterthought.
- It's a good place to build business applications, easily, because all of the things you'd expect from an enterprise platform, are built in - such as notifications, approvals, workflows. Casey said you could go to AWS and build this yourself, but you'd have to do it from the ground up.
- It's an enterprise platform in that it was designed to achieve really difficult availability and performance requirements.
- It has also invested a lot in compliance
- It is also a platform that 'low code developers' can use, as its functionality often means that you can build an 'app' by pointing, clicking, dragging and dropping.
We are actually trying to get back to our platform roots and really focus on getting people back into the platform and using it as a platform.
What was interesting about Casey's presentation was that he showed us a pie chart of the potential applications market (not entirely sure the source of the data), which estimated it to be at $22 billion. Of that he expects service now to have a strong play in ITSM (worth up to $3bn), a fairly good sell into HR, field service and facilities (worth up to $6bn), but he doesn't really want ServiceNow to get into selling directly into the remaining $16 billion.
Rather, Casey would like to see companies building new service apps on the ServiceNow platform and let ServiceNow just take a cut of those revenues (20%). These apps will be sold via the newly launched ServiceNow store, which is effectively a marketplace for products built on the platform. But what businesses does Casey see being built in this $16bn area? He said:
We will still make money here, because we will still be selling the underlying platform. If I look right now at the non-ITSM stuff in this section, there's a lot of pharmaceutical stuff, trial management apps, lab management apps – I think that's because of certifications, we have an FDA approved system. Talking through my vendor base, I think the next wave will likely be around security related products. My guess is you will see a chunk of security related stuff on there in the next six months.
From conversations I've had today, ServiceNow's compliance capabilities are very strong, and it is expected that plenty of service apps will spring up around FDA regulated industries. And integrations with Splunk make sense for those interested in pushing the security apps.
Casey also clarified the point about not expecting companies to rip out their system of record, which from what I gathered at the event today, was the impression being put across. Selling 'ServiceNow is now in HR' makes it sound like it's a full HR app, which it most likely isn't. Casey said:
You're probably always going to have a HR system of record that manages payroll and accounts receivable, it's totally distinct from your ServiceNow platform. I just don't think we are ever going to go whole hog into that business to the point where you can do leave of absence with all the legal requirements around it, etc. There's a lot of domain expertise you'd have to build out there.
So you're going to have part of the process live inside ServiceNow, it's generally going to be the request response, the end user touch points, the question, the answer, the front-end. At the back-end there will at some point be touch points over to another system. That's the expected model for the most part.What you see, for the most part, is people saying is that's a back-end system that normal humans are not going to successfully interact with, so I'm going to use ServiceNow to manage all the interactions between my various departments, customers and employees. It's the common portal, it's the common web, it's the common mesh.
ServiceNow isn't the easiest proposition to sell. It's not like saying: “Hey, we are really great at HR or CRM”. It has the potential to do anything. It can make pretty much anything a service. And that's a double-edged sword. As I said previously, I'd put bets on this being one of the dominant platforms in the industry going forward, but it needs to sell its messaging better.
But tomorrow there is a Q&A with Frank Slootman, so there may be more to report after that. Keep tuned.