ServiceNow drills down on mobile, government and the compulsory AI

Profile picture for user slauchlan By Stuart Lauchlan October 25, 2017
Summary:
ServiceNow has expanded from ITSM into HCM and customer service management. Government, mobile and AI are big agenda items now,

John Donahoe, ServiceNow CEO
John Donahoe

ServiceNow just splashed out to acquire mobile platform company SkyGiraffe with the objective of making work life as mobile-friendly as consumer life.

According to the official announcement, SkyGiraffe technology should be embedded in the Now Platform in 2018, offering all packaged applications in a native mobile format, including the flagship IT Service Management (ITSM) product. ServiceNow also says that customers will be able to:

build mobile apps in days, not months, utilizing no/low-code tools and design templates. There will be no need to write cumbersome code or scripting. Native mobile app experiences are expected to include maps, live GPS, phone, contacts, email, rich media and notifications.

The announcement came as the firm turned in a loss of $24.2 million for its third quarter on revenue of $498.2 million, the latter beating consensus Wall Street expectations. The company expects full-year revenue of $1.92 billion.

On the SkyGiraffe acquisition, CEO John Donahoe said that this, coming on top of the earlier Telepathy purchase, demonstrates ServiceNow’s commitment to strengthening its mobile proposition:

Strengthening our mobile capabilities is a priority for us and we’re already good at delivering enterprise mobile experiences. But the standard today is no longer an enterprise mobile experience. The new standard is delivering the same kind of great consumer mobile experiences that we enjoy in our everyday lives.

[SkyGiraffe] gives us a world-class team to make mobile native to our platform in 2018 and to deliver amazing consumer quality mobile experiences to our enterprise customers.

Away from this latest acquistition, Donahoe pointed to a number of stats to validate the firm’s current strategic direction, which pivots on building on the ITSM foundation and pushing into verticals, such as HCM and customer service management. To that end, he cited:

  • 22 deals closed in the past 3 months with annual contract value (ACV) greater than $1 million.
  • 35 customers in the quarter, doing more than one million in ACV.
  • the largest Federal Government deal to date, coming in at $7 million in ACV.
  • ITSM offerings were part of 17 of the top 20 deals.
  • In HCM, the employee services experience product led three of the top 20 new customer deals and is now used by 119 customers in the Global 2000 (G2K).
  • In customer service management, two million-dollar plus deals were recorded.

On HCM, Donahoe said that every CEO has improving the employee experience as an agenda item today:

The thing to keep in mind is that employee experience is not just an HR issue. An employee’s experience cuts across IT, HR, facilities, finance, all parts, and that’s what our products really do. They drive a cross-functional, improved employee experience. In fact, we’re thinking about even relabeling it not so much as HR but employee experience. So that demand is quite strong. It’s coming both from IT and HR, frankly driven by overall company-wide initiatives to improve employee experience.

We’ve now got almost 119, 120 G2Ks for using our employee experience product and we think there’s ample opportunity. We do not compete with what Workday or Success Factors do. They are outstanding HR systems. For instance, we use Workday internally, and our goal is to partner very effectively with Workday, SuccessFactors and other HCM products to help deliver enterprise-wide great employee experiences.

During the quarter, we announced an agreement with SuccessFactors. We’re trying to more deeply integrate our products and the data across the products to help deliver seamless experiences for our customers and their employees, and that’ll continue to be our focus.

That big Federal Government deal also stands out. This was fundamentally an ITSM deal, said Donahoe:

One of the Under Secretaries of this department said that it was their first enterprise-wide SaaS solution. It’s going to support 500,000 end users and almost five million contacts per year. These are large organizations that are under pressure to streamline and automate how they operate, both to lower cost and to serve their employees and citizens better - and our platform is a natural starting point.

Donahoe confirmed that public sector expansion is top of mind around the world, not just in the US:

I talked to governmental leaders in Australia, the UK, Netherlands, where governments are starting to have to go through the same digitization process that companies go through.

That said, there are global differences around cloud adoption, he added, in both private and public sectors:

Certain countries are more ahead on cloud adoption, the US, the UK, Australia, really Northern Europe. Interestingly, Japan is really coming on where cloud adoption is getting stronger and that’s partly driving our strong Japanese growth.

Germany is probably a half step behind on cloud adoption and dealing with more some of the German security and data localization issues. So, I think that offers real growth opportunity in the coming years as Germany begins…to embrace cloud more fundamentally.

The AI pitch

Of course in 2017 it’s de rigeur to have an AI pitch and Donahoe didn’t disappoint, pointing to ServiceNow’s acquisition of DxContinuum earlier this year. This was done, he said, to enable customers to access machine learning capabilties for specific reasons, not just to be able to tick the AI box:

It’s not AI for AI’s sake or machine learning for machine learning’s sake. It’s to deliver specific use cases.

He added that ServiceNow had eaten the AI dog food itself, introducing machine learning into its own customer support center:

Within two weeks, the intelligent agent was outperforming human accuracy on incident categorization and incident routing. And what that means is two things. One, that our customers are getting their problems delivered to the right person in a more quick and accurate basis. Secondly, and I’d say as importantly, roughly we estimated 8% of our customer support engineer time used to be incident routing, incident categorization. That’s now freed up to actually solve real problems for our customers.

That capability has now been introduced into the Kingston release of the firm’s customer service mangement offering and will soon be coming to the ITSM product set, said Donahoe:

We think there is just an enormous number of use cases where the machine learning capability can take some of the more redundant, repetitive parts of work that people are working on, handle them in a more automated fashion, which drives greater efficiency or productivity. [It] also enables the IT professionals, the HR professionals, the security analysts, the customer support agents, to focus their energies on higher value-added activities and really delivering great experiences for customers and employees.

My take

ServiceNow stock is up nearly 70% since the start of the year. It’s not difficult to see why.