"We're on a move" - CEO Bill McDermott on ServiceNow's plans for vertical markets, partnering and winning CEO love

Profile picture for user slauchlan By Stuart Lauchlan January 30, 2020
Summary:
The McDermott era at ServiceNow has gotten off to a strong start with an increased focus on the CEO customer base and an eye to vertical thinking.

Bill McDermott

When Bill McDermott was named as CEO at ServiceNow last year there was a general consensus among commentators that his enterprise background and C-Suite level contacts would be a big asset in meeting the firm’s goal of hitting a $10 billion a year run rate.

Three months in, he’s met customers, done a deep dive into the company and the way it operates and come to his own conclusions about some strategic objectives, one of which does indeed include tapping into that CEO-level audience in a more proactive fashion:

If you meet the CEOs - I’m very used to meeting them - they would say,  ‘I haven't had a call from ServiceNow’. But that's after I just got done meeting with the CIO, the COO, and they told me how much they love ServiceNow.

So now it’s about getting that message across to the CEOs:

Every company wants to be a tech company. Actually every company would ideally like to be a software company, but it all starts with that tech backbone, and we can carry that. We've proven it to HR, we've proven it to customer service management, we can prove it with the COO, we can prove it with the risk and compliance folks, and of course, we can also now prove it with CEOs.  I'm in particular excited about that because the rolodex that I have has been calling on me, asking me for new and innovative ways to help them either take cost out with better workflow, or bring in more revenue and growth, because they can manage their business more effectively.

Yesterday, ServiceNow turned in better-than-expected Q4 numbers - net income of $598 million on total revenue of $951.8 million, up 33% year-on-year. Subscription revenue was $899 million, up 35% year-on-year. Other stats of note for the quarter:

  • 76 deals greater than $1 million.
  • 16 ITSM deals over $1 million, the biggest quarterly number to date.
  • 17 of the Top 20 deals included ITSM.
  • 9 HR deals over $1 million, also the largest number yet within a quarter.
  • 14 of the Top 20 deals included three or more IT products.

McDermott cited a number of end user examples to illustrate customer successes during the quarter, including the largest ITAM deal to date, with the  United States Department of Veteran Affairs:

ServiceNow is the core of the VA's Enterprise Service Desk, which supports more than half a million full-time employees and contractors. With our IT portfolio and the cross-functional capabilities of the Now platform, the VA is streamlining processes, saving time and money, improving productivity, and better managing technology assets, and of course, delivering better experiences.

In Latin America, we expanded our relationship with one of the region's largest banks. After seeing tremendous returns on their initial ServiceNow investment, the bank is implementing the Now platform and our IT workflow products across its entire employee base, replacing more than 10 siloed legacy systems.

Bristol-Myers Squibb purchased three IT products plus HR to enable a world-class onboarding experience for all employees. In a competitive sales process, Bristol-Myers Squibb recognized that our cross-functional enterprise capabilities are exactly what was needed to accelerate productivity, reduce new higher turnover, and win award for talent. 

In a strategic C-Suite win, Roche, the world's largest bio-tech company, has signed an agreement with ServiceNow to support its digital transformation strategy. ServiceNow will be the global solution to service project and portfolio management across the entire Roche group. This strategic partnership will help Roche transform its internal business processes end-to-end, simplifying and improving the user experience. This will enable Roche scientists and researchers to work in a more agile way, so they can redouble their focus on their business, which is creating innovative healthcare solutions.

Vertical thinking 

Earlier in the week, ServiceNow announced its intention to focus more on a vertical industry go-to-market strategy that involves building out the firm’s ecosystems and partner channels, beginning with expanded partnerships with Deloitte in banking and Accenture in telecommunications. McDermott said:

We will force multiply ServiceNow with a strong industry and partner ecosystem. The ecosystem is going to become more strategic and more powerful. Our partners tell me they see ServiceNow as the cross-platform integration engine of the modern enterprise. Going after industry verticals and building strong partner relationships will force multiply ServiceNow's coverage by 10x. This will happen across [geographies], industries, and across buying centers.

Expect further partnership announcements to come, he said:

We have had numerous meetings with CEOs and Chairmen of the largest partner firms in the world. In fact, they've been very kind. They've actually even come to Santa Clara, and most of them have come in with very robust ideas on what's possible. None of them have left without at least adding a billion to the numerator of what they think is absolutely achievable with ServiceNow. Some of these investments are in industries…They’re very interested in the industry, the sub-industry vertical, and the buying center approach, and we're trying to do a very good job of giving partners the ability to innovate, co-innovate with us in the customer, and to grow. We’re doing this across all the geographies of the world, or we might have a certain partner in a certain geography in a certain industry, and we could be very specific, but again, it's all about growth, it's all about opportunity, and it's all about honesty, open collaboration, and real trust with the partners. The good news is they all know me, so they know we don't break promises around here, which is very helpful.

He added:

My phone has been literally ringing off the hook with other very large companies that want to do more with ServiceNow. So we're open for business. We're opening for partnerships. And my advice to the partners out there is, don't waste too much time. We're on a move.

But three months into his new role, McDermott was keen not to rock the boat too much:

I think the most important thing I wanted to convey is business continuity, stability, and scale are the things that I'm most in front of right now. We have an excellent team, the go-to-market has been well thought through, and the team itself is highly stable, and we intend to keep it that way. There are no plans to make coverage changes. What we have is what we want. What we will do is we will take a bolder position on the role that this incredible system of engagement, the system of action called workflow, can take in the modern workplace.

If you think about the problems that customers are having today, they have many systems of record, and unfortunately, when they try to think about how people work and how people want to work, they don't have the workflow that enables a team to really set on a course of executing a simple business process. With ServiceNow, that all changes, and you can see the impact that we've had on the employee with employee service delivery, you can see the impact that we've had on customer service management, and many of the big companies in the world today are figuring this out pretty quickly.

My take

A strong start to the McDermott era at ServiceNow. As well as the increased focus on the CEO audience and vertical markets, the company has also announced some interesting tactical acquisitions this week, in the shape of Israeli-based AIOps company Loom System and Passage AI, a California start-up with a conversational AI platform that will be used to support ServiceNow’s goal of supporting all major languages across its offerings. For his part, McDermott is about to embark on a world tour, taking in 3 continents over 11 days. Derek du Preez will be talking to him during that tour. Watch out for coverage of that next week.