As business leaders prudently clamp down on costs while also needing to invest for future growth, the era of limited-function applications is ending and giving rise to a new generation of purpose-built solutions for not only industries, but also specific functions and geographies, says ServiceNow CEO Bill McDermott.
“Our customers are in a difficult macro right now,” McDermott said in a Zoom chat last week for this CEO Outlook series. (You can see our full video interview here.)
“They have to increase their automation, their speed, and their productivity per every asset in the company as they try to do more with less. But they also have to keep an eye on digital transformation and invest for growth — because if they don’t invest in the short term, they’ll slip back in the mid-term and might not be around in the long term.”
And since all of those purpose-built applications and solutions — perhaps as many as 750 million in the next couple of years — will need to interact seamlessly, digital-business platforms are becoming the foundation on which those modern enterprises of the future are built.
As that new reality hits home with more and more business leaders who are shifting from being purely consumers of enterprise tech to creators of those new purpose-built solutions, the race will be one by those who choose to shape their own destinies, McDermott said.
“This is really a very, very interesting development because at the peak of the hype cycle in the pandemic, there were many investments being made in similar point-solution technologies.
“They weren’t always made by a central control tower — some were very sporadic and made in various departments,” McDermott said.
“But now that the belt-tightening is in full motion, the customer’s saying, ‘Hey, wait a minute, I have three or four technologies that are doing very similar things.’ So those points solutions in their own right can do okay, but they have to be the best one in their category — otherwise, they’re going to get down-selected or canceled outright.”
On the other end of the relevance spectrum, McDermott believes that a whole new generation of purpose-built apps and solutions that can be created and implemented in weeks rather than months are the future as businesses strive to harness the power of speed here in the acceleration economy.
“I firmly believe that end-to-end digital transformation — whether you’re taking cost out or putting growth in — on a common platform is a sensational concept. And what I see now is ROI for customers in less than 90 days on some of the biggest projects you can imagine!” McDermott said.
“We were just on the board meeting with a customer who has 50,000 call-center agents that went live on ServiceNow for Customer Service Management without a hitch. In less than 90 days!”
So in this time of extreme optimization, the right platform is essential to provide that “control-tower” capability and expertise to which McDermott alluded.
“And that’s why I say it’s a platform game now where only the strong survive, and the best platforms win. And I like to believe and I certainly know that our results speak to the fact that ServiceNow has become one of the standard platforms for digital transformation in the global economy,” he said. In Q4, ServiceNow subscription revenue reached $1.86 billion, up 22%, or 27.5% in constant currency.
“And that’s why we say we’re the platform for end-to-end digital transformation because with ServiceNow, you can have it both ways: both cost out and growth in.”
The end-to-end positioning that ServiceNow has claimed since McDermott took over as CEO almost three-and-a-half years ago came through very clearly on the company’s recent Q4 earnings call. While ServiceNow was launched and built its early trajectory on being a modern automation tool for information technology (IT) departments, McDermott has aggressively expanded ServiceNow’s offerings across multiple other functional units to enable the company to meet customer needs for simplified processes and related workflows.
On the call, McDermott laid out the impressive inclusion of ServiceNow’s different offerings within the company’s largest Q4 deals:
- IT Service Management was in 14 of the top 20 deals, with many valued at more than $1 million;
- IT Operations Management was in 16 of the top 20, with 14 over $1 million;
- Security and Risk Solutions in 13 of the top 20, with nine over $1 million;
- Customer workflows in 13 of the top 20, with 13 over $1 million;
- Employee workflows in 13 of the top 20, with 11 over $1 million; and
- Creator workflows in 19 of the top 20, with 11 of those over $1 million.
When listening to that Jan. 26 call, I was struck by the impact that Service’s high-flying Creator workflows have made, with inclusion in more deals than any other product (19 of 20). I asked McDermott to talk about the significance of that boom in the Creator business, and within his reply from him he outlined this powerful “revolution in business software.”
“What’s going on there is our customers are building their own applications on the ServiceNow platform,” he said, contrasting that 20-30 years ago when “it was always about some big software company building a shrink-wrap app, shipping it globally, and then rinsing and repeating that cycle every one or two years” with complex, expensive, and often-disruptive upgrades.
“But what’s super cool here is that everything’s real-time. So all the applications that are being built are being built by our customers for their own use. And they can do it in a way that is lightning fast, extraordinarily low cost, and it integrates with all the big departmental needs.”
McDermott described how a business analyst in a human resources (HR) department can build a reward program for employees that can then be instantly integrated into the broader Employee Experience portfolio.
“That’s where the common platform is so powerful: There’ll be 750 million new applications built in the next two years on low-code platforms like ServiceNow,” McDermott said, “and that’s more application development that has taken place in the last half -century.
“So this is really a revolution in business software.”
Revolutions are powerful things, and they can be wonderful for those on the right side of the new order. To help business leaders gauge where they stand in these revolutionary times, I’d love to see ServiceNow build an interactive app that lets a business take a quick scan of its internal capabilities to help it determine the role it’s likely to play in that business- software revolution: Will it be a leading player in the new movement, or is it destined to become a relic in a history museum?
McDermott, ever the passionate optimist, says the choice between those two fates should be clear to every business leader — but they can’t just accept and, worse yet, perpetuate the status quo.
“Finally, ordinary people — like you and me — are building applications on the ServiceNow platform— you don’t have to be an exemplary engineer because it’s so simple that real people can build apps on it,” McDermott said.
“That’s happening at a record clip, and each one of those new applications is super important because they represent various people.
“But collectively, it’s a platform game. And with ServiceNow, everything is integrated out of the box and all of that resides on one platform that resides above the systems of record, and the mess that’s been created over the last half century.
“And now companies can run simple, and that’s a big game-changer.”
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