Enterprise

Bill McDermott wants to grow ServiceNow, fast. Rivals like SAP and Salesforce may stand in the way.

Turning the company into a juggernaut means going up against some of the industry's biggest names.

Bill McDermott wants to grow ServiceNow, fast. Rivals like SAP and Salesforce may stand in the way.

Bill McDermott has great hopes for ServiceNow.

Photo: ServiceNow

Bill McDermott took over as ServiceNow's CEO in 2019. But the foundation for the jump was laid a few years prior to that, when he saw a glimmer of great promise in the company.

After former CEO John Donahoe was appointed head of ServiceNow in 2017, McDermott, then CEO of SAP, was the first business leader to fly out to California to meet with him. During that huddle, McDermott, impressed by ServiceNow's platform, pushed for the two companies to become close partners in the marketplace.

"This company did it right. It grew organic innovation," McDermott told Protocol. "I saw it before it ever became an opportunity for me to be CEO."

So when Donahoe left to lead Nike, McDermott put together a five-point plan — the same one that he's running with now — highlighting how he could take ServiceNow from a $5 billion IT vendor to a $10 billion company enterprise-wide solution. He presented it to the board of directors, and the rest is history.

Still, despite seeing promise, McDermott didn't arrive into a cakewalk. ServiceNow might have already been growing at an impressive clip, but it's seen notable turnover at the top of the organization: prior to Donahoe's short tenure, Frank Slootman left for Snowflake after six years as CEO. And with McDermott in charge, it's in the midst of a huge rebranding, to turn itself from an IT-only solution to a platform that supports collaboration across the entire enterprise.

It's early days, of course. And while the company has a head start on rivals, that success hasn't been unnoticed by industry giants such as SAP and Salesforce. Now those companies are all pivoting to the burgeoning and increasingly lucrative "employee experience" industry that ServiceNow has — until now — enjoyed largely free reign over.

The salesman mentality

A quintessential salesman with a Rolodex that's nearly unmatched in the industry, McDermott has a knack for pageantry.

At an employee all-hands meeting last month, for example, Sheryl Crow performed a virtual concert, according to people familiar with the event. And on Feb. 1, McDermott interviewed Barack Obama at an internal event to kickstart Black History Month, according to sources (the company declined to comment on internal meetings). McDermott also brought over the "Winners Circle" from SAP: a year-end extravaganza for the company's top salespeople, put on hold for 2020 due to the coronavirus, but expected to return by the end of this year.

"Businesses have to step beyond the boundaries of just being a corporate entity," he said. "You've got to be on a purpose-led mission, but you also have to be very human."

Most of that wouldn't matter if McDermott didn't also have a track record of success. But he took SAP from a roughly $50 billion legacy on-prem provider to an emerging cloud player with a market cap flirting around $160 billion. And while the company is struggling now — as CEO Christian Klein mounts a major turnaround effort, some of which involves integrating the 38 companies McDermott acquired while at the helm — he brushed aside any notion that it's a result of his nine-year tenure.

For now, McDermott has been enjoying a pretty open runway at ServiceNow. At their most basic, the company's core product can help streamline, and potentially automate, the more mundane aspects of certain jobs, such as onboarding for new employees, which can be done via ServiceNow's platform completely from their own cell phone. But on a larger scale, the platform has helped customers rework entire workflows, an unglamorous but foundational part of organizations.

And financial results since McDermott arrived show there's certainly appetite for the products, however nonexotic they are. Subscription revenue skyrocketed 32% in the three months through December to $1 billion, and for 2021, the company is projecting sales to reach as high as $5.5 billion, a 22% rise. Last quarter, the company landed its largest deal ever with the Department of Veterans Affairs, now its biggest client. And despite the global economy still showing signs of weakness, IT spending is rising, giving McDermott and others confidence heading into 2021.

"They'll be a reordering of the large-scale [software] players in the new economy and we'll be one of them," he said.

Encroaching on rival territory

Like other software executives, McDermott is riding the digital transformation riptide, one that grew in prevalence over the past several months and promises to continue after the pandemic subsides. But ServiceNow appears particularly primed for growth as companies increasingly look for solutions to help employees be more productive in the emerging hybrid world.

The company started off with a focus on IT, assisting tech leaders in managing help desk tickets and other less glamorous aspects of the job. But now, it's trying to grow to other areas, an expansion that is perhaps made easier after winning over tech leaders at organizations who often have influence on spend outside of their own departments. Outside of new business verticals, the company is also gearing up to make a big push in the low-code space with its new "Creator Workflow" product.

One of the benefits of its platform is the ease with which it can integrate into other collaboration tools, like enterprise resource planning systems from SAP and Oracle, per McDermott, who called it "the secret sauce." That's helped ServiceNow largely play nice with rivals, but more direct competition is looming, particularly as efforts intensify to win the growing, but still limited, tech dollars at corporations.

While no other company is currently offering a directly comparable platform, other vendors are nibbling at the edges — particularly as ServiceNow continues to expand beyond IT. For example, Salesforce, which analysts say is an emerging rival, took a key leap forward in its journey as an employee management software provider with its Work.com platform, a tool that helps companies manage their physical offices in the new hybrid-work world. SAP recently acquired business process manager Signavio. On Thursday, Microsoft unveiled a new suite of "employee experience" products that wade into ServiceNow's territory. And then there's Workday and others who compete in the HR tech marketplace. Even Box, which spent $55 million to acquire an e-signature company, is now branding itself as a business process manager.

ServiceNow is "encroaching into territory previously held by companies very familiar to Bill," said Constellation Research principal analyst Holger Mueller. And if McDermott "wants to grow faster than IT spending is growing, then he has to take it from someone."

For ServiceNow, "if the question is competing by providing core application functionality," there is no competition, Valoir analyst Rebecca Wettemann said. "If you're talking about competing for dollars, they already are." The challenge, then, becomes convincing, say, an existing Workday customer that there is value in deploying ServiceNow's products on top of that. (ServiceNow is a Workday customer, per sources, despite gradually encroaching on the company's core client base).

In an example of the type of growth McDermott is trying to mimic across customers, Calgary Catholic School District spends roughly $1.5 million on ServiceNow each year, alongside investments in Oracle's PeopleSoft, per the district's IT director, John Schutte. The education system started off by deploying it in IT and now uses the platform across several functions, including facilities management, procurement and HR. And in a sign of the compatibility with other products, Calgary is beta-testing integration with Microsoft Teams.

To help achieve his vision for expansion, McDermott promoted Lara Caimi to chief customer and partner officer. He also brought on two key hires, former Salesforce exec John Ball and former Oracle exec Gretchen Alarcon, as general managers. Overall, the company increased its workforce by 26% in 2020. And while hiring is expected to continue, the pace may subside.

"It's harder to get hired at ServiceNow than being an undergraduate trying to get into Stanford," McDermott said.

Building a century-defining software company

McDermott's jump from SAP, which at the time was doing roughly $33 billion in yearly sales, to ServiceNow, an up-and-coming provider, raised some eyebrows among analysts and other industry watchers. For McDermott, it was equal parts right timing and right opportunity.

"I had a wonderful run at SAP. We obviously created something special," he said. But, "I felt that if I could bring my experience and my vision to ServiceNow ... it could become the defining enterprise software company of the 21st century."

As McDermott's tenure at ServiceNow lengthens, his past at SAP comes further into focus. Some analysts say, for example, that his departure left a major void in leadership that the company is still struggling to fill, a claim McDermott disputes, along with any link between his rapid deal-making and SAP's current troubles.

"We didn't do too bad on the cloud. The history shouldn't be revised," he said. "Not a single one of those large-scale transactions were anything less than successful."

In many ways, ServiceNow is a much cleaner version of the kind of platform SAP is trying to now build. The cloud-native system operates as a unified data repository, giving companies a more detailed view of their organization and the workflow that occurs between workers and departments.

"The platform is one architecture, one data model, one platform," said McDermott. "You can swiftly build new innovation on it and roll it out."

But a key hurdle is convincing those outside IT that such a system, and the insight gained from it, can actually help save significant sums of money. A winning point for ServiceNow right now is its costs, which industry insiders say remain well below what SAP, Salesforce and others charge for additional licenses; the return on investment for the Calgary Catholic School District on ServiceNow is an impressive three-to-four-times its spend, according to Schutte. Maintaining that competitiveness, however, becomes trickier as ServiceNow looks to beef up revenue.

ServiceNext?

The recent months have tested the resolve of leaders like McDermott who try to, at least publicly, stay out of politics. But, like other CEOs, McDermott was forced to address the divisive political climate head-on after the January riot at the U.S. Capitol.

"Yesterday was an incredibly painful day in American history that has ripple effects to people all over the world," he wrote in a note to employees, seen by Protocol. "While the world is filled with its challenges, they are superseded by its opportunities. I'm inspired to know that we have a once-in-a-generation opportunity to change the world."

The role of activist CEO is not uncommon in tech, but McDermott is a bit different. He largely eschews any public commentary on politics and previously said the goal of a company like ServiceNow should be to support whatever administration is in the White House. But McDermott himself was floated as a potential third-party candidate in the 2016 election.

Asked about his political ambitions, McDermott seemed quite content where he is now. But he didn't rule out a run in the future after the recent election showed that "people can make substantial contributions to the public good well into their 70s."

"In that context, public service would be the perfect thing for me to do someday," McDermott said.

But for now, he seems happy enough trying to realize the potential he saw in ServiceNow during that meeting with Donahoe, and putting it up against the industry giants he knows so well. "I've loved all my jobs," McDermott said. "But this one is really super special. I really, really find that this is my most enjoyable professional moment of my career."

Fintech

Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”

That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.

Keep ReadingShow less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

The financial technology transformation is driving competition, creating consumer choice, and shaping the future of finance. Hear from seven fintech leaders who are reshaping the future of finance, and join the inaugural Financial Technology Association Fintech Summit to learn more.

Keep ReadingShow less
FTA
The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.
Enterprise

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

It will be the second re:Invent with CEO Adam Selipsky as leader of the industry’s largest cloud provider after his return last year to AWS from data visualization company Tableau Software.

Keep ReadingShow less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

As of today, we will not publish any more stories. All of our newsletters, apart from our flagship, Source Code, will no longer be sent. Source Code will be published and sent for the next few weeks, but it will also close down in December.

Keep ReadingShow less
Bennett Richardson

Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.

Enterprise

Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

On any given day, Lily AI runs hundreds of machine learning models using computer vision and natural language processing that are customized for its retail and ecommerce clients to make website product recommendations, forecast demand, and plan merchandising. But this spring when the company was in the market for a machine learning operations platform to manage its expanding model roster, it wasn’t easy to find a suitable off-the-shelf system that could handle such a large number of models in deployment while also meeting other criteria.

Some MLops platforms are not well-suited for maintaining even more than 10 machine learning models when it comes to keeping track of data, navigating their user interfaces, or reporting capabilities, Matthew Nokleby, machine learning manager for Lily AI’s product intelligence team, told Protocol earlier this year. “The duct tape starts to show,” he said.

Keep ReadingShow less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories
Bulletins