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Protocol | Enterprise

Bill McDermott wants to break SaaS out of its silos. Here's how.

The ServiceNow CEO says his company is creating new markets by expanding. Hungry subscription-software rivals might beg to differ.

ServiceNow CEO Bill McDermott sees a bright future ahead.​

ServiceNow CEO Bill McDermott sees a bright future ahead.

Photo: Krisztian Bocsi/Bloomberg via Getty Images

ServiceNow grew in prominence by tackling IT management, an area that many other enterprise software vendors ignored. Now, it's expanding well outside supporting help desks.

But that means competing in a more head-on way with companies like Salesforce that also see a lucrative future in productivity and collaboration tools that help manage workflows within an organization — as well as areas like customer service, where ServiceNow is also trying to play.

That prospect doesn't bother CEO Bill McDermott, who sees ServiceNow's approach as distinct: loading all its applications onto one platform with one data architecture so companies can more easily layer on automation.

"There's a reordering of the competitive landscape that's taking place, not because we are eating anyone's lunch but because we've defined a brand-new market," he told Protocol.

ServiceNow may be in a better position than others to capitalize, particularly those with tons of legacy applications to grapple with. SAP, for example, is still working on integrating many of the vendors that McDermott purchased during his tenure there as CEO.

The numbers suggest McDermott's approach is working. On Wednesday, the company reported a 30% growth in subscription revenue in the three months through March to $1.3 billion. But that kind of growth, fueled in part by the ongoing pandemic, is becoming just a baseline for SaaS players. And in a sign of just how competitive the landscape is getting, Atlassian unveiled on Wednesday an expansion of its key product, Jira, outside of IT into many of the same functions that ServiceNow is trying to own.

ServiceNow has some internal hurdles. The company has struggled to close its gender gap and made little progress in hiring more Latinx and Black employees, according to a recent diversity report. Now, McDermott, who has long been a vocal champion for diversity, says his company is embarking on a big push to address the problem — albeit without a permanent HR chief in place. Much of that is pretty commonsense steps, like reaching out more to historically Black colleges. But it also means deeper changes, like hiring more-diverse recruiters who can "engage with people that understand them culturally in a way that wasn't in the palace before," he said.

Protocol talked to McDermott about how he plans to lead ServiceNow through an increasingly crowded competitive landscape.

This interview has been edited and condensed for clarity.

ServiceNow grew in prominence by filling a gap in the marketplace. Now, the company is competing more directly against rivals like Salesforce or Atlassian. How do you win in this new SaaS landscape?

It's very clear to me that we're playing a different game. Nobody has to lose for ServiceNow to win. We are a platform company. We are a better-together story. If you look at our company, 17 of our top 20 deals came from multiproducts into a real [packaged] solutions company. What you're seeing is ServceNow having one architecture, one platform and one data model. There's a reordering of the competitive landscape that's taking place, not because we are eating anyone's lunch but because we've defined a brand-new market. Perhaps others might get nervous about that. But they shouldn't be. Because all of their solutions integrate into our platform anyways. And there could be more cooperation if everyone just adopted the ServiceNow platform.

You're clearly not the only company trying to make a platform play. Salesforce is obviously trying to tackle this with its Slack acquisition. How do you combat that?

We are fully integrated with Slack. Slack loves us. And if you think about Slack, you also have to think about Teams, you have to think about WebEx, you have to think about Zoom. And every one of those collaborative tools fully integrate into the Now platform. The question that I would have is: Is there any competitive advantage for an enterprise software company to own the collaboration tool? I think not. I think the competitive advantage is in partnering with all of them, enabling their APIs within your platform, so the customer gets the benefit. We didn't even have to spend $30 billion to achieve that.

Microsoft says users increasingly want to spend more time away from those native applications and instead access them directly in Teams. Application providers say the opposite, that Teams is never going to become more than a platform for the "superficial" work. It sounds like you are saying something very similar?

That's right. The customer today wants choice. ServiceNow is advantaged because we didn't get into the broad spectrum of getting jumpy, seeing something that looks hot and we have to buy it, because then you have to integrate it. And you have to prove to shareholders that you can outrun what it would have done as a standalone company. Then your engineers spend 80% of the time innovating the past versus innovating the future.

I'll give you an example. RPA is not a particularly differentiating technology, but we actually built it into the Now platform. That doesn't mean there aren't other good RPA companies in the world like Automation Anywhere or UiPath. And that's why we integrate with them fully.

In the future you're describing, where you see more activity moving on to ServiceNow's platform, what happens to Teams and Slack as platforms?

Everybody is in it to win it. But nobody has to lose for us to win. We want to be on the right side of the customer. We're going to win with unbelievable engineering, a very unique platform and [by] being extraordinarily friendly to the ecosystem.

Switching gears, ServiceNow recently released its annual diversity report. There hasn't been a lot of progress: Black representation is up less than 1% over the past four years. There's similarly small growth for Latinx employees. You've been a big champion for diversity. Why are these increases so small, and what are you going to do to fix it?

We have a wonderful five-point plan for diversity and inclusion and belonging. If you think about a distributed workforce, we are going to reach out to new geographies that are far away from Silicon Valley to enable and to recruit from different places that we would have never gone to before. We've diversified our recruiting team so people engage with people that understand them culturally in a way that wasn't in the place before. We're making sure we promote from within. We have equal pay. We've done all of these things and more.

As the economy opens up, our plan is rock solid. The reopening is going to really bring a lot of this to the forefront. Our brand is resonating all over the world.

How much of an increase are you expecting to see?

You'll see. We have a great focus on women in business. That's a number one priority. Latinx is a number one priority. Asian is a number one priority. African-American is a number one priority. All of this is number one priority. We're going to create thousands and thousands of jobs. Going to historically Black colleges and universities. Engaging people before they even get to the university level. Hiring younger people into the workforce, putting apprentice programs in place. You'll see our number increase quite dramatically.

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