ServiceNow gets serious (again) - Bill McDermott joins as CEO

Profile picture for user ddpreez By Derek du Preez October 23, 2019
Summary:
As current CEO John Donahoe heads off to become CEO of Nike, what does ex-SAP CEO Bill McDermott bring to the table for ServiceNow’s next phase of growth?

Image of Bill McDermott

It was announced yesterday that ServiceNow CEO John Donahoe is going to return to his consumer roots and take over from Mike Parker to head up Nike in 2020. Catching the industry by surprise, given his very recent departure from SAP as CEO, Bill McDermott will now be taking up the top job at ServiceNow. 

The news has been covered far and wide, so I won’t go into too much detail on that front. However, given that I’ve been covering ServiceNow since around 2013, and as someone who has had CEO access from the company for years, I thought I could maybe provide some interesting context. 

And for this context, and to understand why McDermott is potentially a great win for ServiceNow, we have to go back a number of years. 

The early Slootman years

When John Donahoe took over from Frank Slootman as CEO of ServiceNow back in 2017, it was a necessary change. Slootman‘s tenure saw him grow the company from a multi-million dollar revenue business, to one that was bringing in $1.5 billion annually. 

However, Slootman himself knew that he was an IT guy and during his time he consolidated ServiceNow as the ITSM cloud vendor of choice. But the beauty of ServiceNow is that it is a platform play and it has a broad application across the enterprise. 

ServiceNow allows enterprises to reimagine their processes by plugging into existing systems of record, automating experiences for both employees and customers. In other words, anywhere there is a laborious, manual or siloed process, ServiceNow’s workflow platform enhances that experience. This is clearly critical in the context of ‘everything-as-a-service’ and blurred enterprise lines. 

Back in 2015 I wrote that ServiceNow could be the enterprise cloud platform to beat, if it executed on expanding its use case beyond ITSM and appealed to a broader audience. At the time, if you went to a ServiceNow event, it was filled with hardcore ITSM people that loved to sit and stare at workflow diagrams. Nothing wrong with that, but its scope was limiting. 

Slootman knew this. ServiceNow needed a successor that understood the importance of ‘experience’, user need and could equally scale the company’s capabilities across a number of areas - HR, security, customer service, etc. The company also needed a rebrand that reflected this. 

Enter John Donahoe

So when it was announced that ServiceNow would be hiring a CEO from the consumer world, whilst perhaps a bit unusual, I wasn’t particularly surprised. Having served as CEO of eBay between 2008 and 2015, Donahoe more than doubled the company’s revenues - he knew how to scale a business. However, more importantly, Donahoe understood the value of experience in the workplace and for consumers. And given eBay was a ServiceNow customer during Donahoe’s time there, he also understood the role the platform could play. 

In the first of what would be many interviews with diginomica, Donahoe 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.

Over the following months, ServiceNow undertook an extensive rebrand and adopted the new tagline ‘making the world of work, work better for people’. Donahoe put people at the centre of the company’s purpose - gone were the days of ITSM PowerPoints and in came a more sophisticated message that centred around ‘experience’. 

Not every industry analyst understood this, but I got the sense that it was a smart move given not only how willingly customers were willing to talk to press, but also the pace at which they were expanding their use of ServiceNow outside of IT. 

It was also noteworthy that ServiceNow not only undertook this as a branding exercise, but executed on its messaging internally too. For example, the company has invested heavily in its diversity programme and focused on what its own employees need to make the world of work better for them. I’ve had customers explicitly tell me that they are expanding their use of ServiceNow exactly because of these investments and that they felt the culture of ServiceNow reflected their own business. 

During Donahoe’s time at the company, revenues have grown to almost $4 billion annually and the company has seen uptake across a number of business lines and industries. 

But, a change is needed…

With this background in mind, I’d argue that McDermott taking the helm as CEO should be viewed within the context of ServiceNow entering its third phase of maturity and getting serious about enterprise transformation. 

Donahoe was brought on board at a time when the company needed to pivot away from the IT department and garner a broader appeal (perfect for a CEO with a consumer background). However, I believe that McDermott could well be the person to execute on ServiceNow’s strategy of reaching scale in the enterprise. 

And whilst Donahoe has done a successful job during his time, McDermott brings with him the enterprise clout to embed ServiceNow as a strategic platform for buyers. McDermott understands how enterprise buying works and he brings with him decades of experience in ‘enterprise transformation’. 

If my guess is correct, McDermott is being brought in to position ServiceNow at the centre of these transformation stories. The vendor has sometimes been overlooked as strategic at the core, or underestimated by the market for its capabilities, and someone with McDermott’s gravitas could help turn that around. 

ServiceNow is typically deployed in the IT Department as a first purchase and then begins to gain traction in other areas of the enterprise. What’s necessary is a thought through message about why ServiceNow is *the* strategic platform that sits at the centre of a company’s ‘digital transformation’ journey - the platform that touches all corners of the enterprise, all employee and customer experiences. 

Buyers need help understanding that within the context of a rapidly changing landscape, within which a bunch of other cloud platforms are competing for attention. ServiceNow’s advantage is that it plays into the change management agenda for enterprises, in that it aims to make the experience of work better for all.

McDermott could well be the person to get that message across - and his black book of enterprise contacts won’t go a miss either. This is someone that despite a challenging time at SAP over the years still managed to grow the firms’ market value from around $100 billion to $142 billion. And McDermott knows how to talk to buyers at the highest levels of all organisations. 

The move from SAP to a growing cloud vendor may raise a few industry eyebrows, but I would argue that the decision is a rather savvy one on both the part of McDermott and ServiceNow. 2020 is set to be an interesting one and we will be watching closely.