In 2012, ServiceNow earned the dubious distinction of being the first business technology startup to go public after Facebook’s disappointing IPO. To the gratification of investors, it had no problem blowing through an anticipated $2 billion market capitalization by ending its debut day up 37% over the initial pricing range.
Today the cloud service management software company (NOW) is worth close to $9.7 billion. Its technology has found converts among 2,500-plus businesses eager to optimize processes for everything from help desk management to facilities or human resources requests. Big accounts include Swiss Re, Enterprise Rent-A-Car, Flextronics, and Kimberly-Clark.
The company’s next earnings report (for the year ended December 2014) is due out on Jan. 28. Analysts are calling for revenue of around $678 million—by the end of 2015, sales should be close to $950 million.
What’s up for the year ahead? President and CEO Frank Slootman took over from founder Fred Luddy in 2011 after selling his previous company, Data Domain, to EMC and dipping his toe into venture capital. He spoke with Coins2Day about why the concept of service management is catching on outside IT departments. His words have been condensed and edited for length and clarity.
Define service management, especially for the non-IT person.
If you call a service provider with an issue, whether you want something or you have a problem where you need information, people start scurrying around and trying to deal with your issue. You get that when you talk to human resources or facilities—you’ve lost your badge or you want to change your 401(k) allocations. It’s a very people-based business, but essentially what happens is that there’s a huge amount of work. People are very, very busy.
What makes service deliverable management “manageable” is when it’s considered through a structured, defined approach. Instead of you just calling up and saying, “Hey, I have a problem,” we structure that request, we structure that workflow. All those events are aggregated as alerts. [Using ServiceNow] I can put them in a database, and I can report on it, I can add analytics. I can break these alerts down in every category so I know what we’re working on, and how well we’re doing on it. That just changes everything.
Our customers are always like, “God, I had no idea HR people were spending a third of their time on benefits problems.” That’s because there is no visibility. The whole service process is completely opaque. You can’t manage what’s opaque, so you need to create a structure that allows the whole process to become transparent so people can see what we’re working on, how well we’re doing.
So now we’re getting proactive. That’s the management dimension. As opposed to me just chasing my tail and solving problems, now I’m going after the underlying sources of all these tickets coming in, coming over the transom. I’m going to eliminate what’s driving all that work into my organization. That’s what management is about, as opposed to just chipping away at the volume of work that’s coming in.
E-mail has become sort of the universal go-to [for handling this] because we don’t have structured processes and workflows to do this sort of thing. That’s really the big change, where we’re going away from unstructured message-based communications to structured workflow approaches that make everybody look at the same data in a very structured, transparent fashion. There’s no longer any need to send emails because the information will be right in front of your nose.
The IT department is still central in this mission, right?
IT is a very service-intensive business. It has a fine appreciation for the service model because [it often is] just deluged by work, and that didn’t make IT very popular within the employee population. Service management became a survival strategy; IT had to find ways to deliver services in a different way than the way HR, facilities or purchasing teams—or anybody else in the business.
IT people are technology-savvy, of course, so they understood and appreciated much better than an HR organization or sales organization what technology can really do to change things. They understand process, they understand structured approaches to things, they understand databases, they understand record definitions. That’s why this discipline really fell into fertile ground in the world of IT.
[For us] IT is also the organization that brings the notion of service management to the broader enterprise. They are not just the end user of this approach, these techniques and these systems. They’re also the people advocating and championing how service management works across the broader enterprise. The IT team is not just our customer, it is our partner in terms of approaching the broader enterprise, which is a very unique thing. About two-thirds of our business still is very much focused on IT internal service management. But I’ll tell you what—a couple years ago, that would’ve been almost 99%, so our influence is very, very rapidly growing into these other functional areas.
IT is at a crossroads because a lot infrastructure operations responsibilities are moving into the cloud—no longer their problem, other than that they have to procure it, and from the transactional standpoint of managing the service relationship, that’s still their job. But a lot of the infrastructure work is not IT’s issue anymore. A lot of the application responsibilities are at least in part moving into the line of business. So, IT is at a point where it is redefining and reinventing itself for a completely new role in the enterprise. A lot of that has to do with how we work and how we manage service.
Can you give me a customer example?
We have retail customers that use ServiceNow for supply chain management. We have some very large retail customers who essentially have been communicating with e-mail and spreadsheets with all their stores and distribution centers on a continuous basis. You know, they need drills and saws in a particular store at a particular time and a particular price. They don’t have them and some other store has them or distribution center has them, so everybody is constantly rebalancing and moving products to the right place at the right time. That’s how retailers make money: supply chain optimization is the difference between making money and not making money, it’s really important.
Typically, these processes run through e-mail and everybody maintains their own little database, like a spreadsheet or whatever other tool they use to keep track of all their requests and the status and so on. These tasks are analogous to what goes on in service management. They need total visibility, right? Which stores, what products? Service management lets companies start to pinpoint the problems in the supply chain, and how they can proactively go after them.
What differentiates your approach from legacy companies?
That actually goes to the heart of why we even exist as a company. Our founder, Fred Luddy, back in 2003 was inspired by brand-new consumer products from Yahoo and Google. Both Yahoo and Google had approached us to do software, where people without any training or documentation were able to define their own custom homepages, right? You just selected things off of lists, you’d check boxes, and then poof, the page just set itself up to your own unique needs and preferences.
And Fred was like, “Man, you know, enterprise software could be that way, completely declarative, no programming, no training, no documentation.” That would be an enormous thing, because you would basically increase the number of people that could use your software by orders of magnitude. Instead of having extremely arcane technical demanding skills needed to use your software, all of a sudden everybody with moderate skills could become a user of your platform.
Our type of applications could be built before. But they were very, very demanding for the people doing it, and it was expensive and it was slow. They were very difficult to change, and that’s a huge problem. This whole notion of agility is very important in the world of business. People want to make changes to workflows, to the analytics, they want to make changes to the data structures literally on a daily basis. That used to be a once-a-year occurrence, because it was so difficult and risky and painful that the tools limited the amount of change that companies could process. Now it’s just happening in front of your eyes.
That’s what ServiceNow brought. We just massively lowered the bar, allowing orders of magnitude of more people to be productive on the platform. Then there’s this notion of abstraction and agility. Abstraction just means that you don’t have to know as much, but agility means that I can change everything about this application right in front of your eyes in real time. And that’s intoxicating.
What’s your top priority for 2015?
2015 is not that different from 2014, there’s only one goal that we have. Our mission is to basically drop the ‘IT’ from service management discussions. Instead of having people talking about IT service management, we just want them talking about service management, the implication being that it’s an enterprise discipline.
We believe that if we’re successful, service management will be as common as ERP and CRM and all the other alphabet soup applications that you’re familiar with. It’s just something that we have. It’s part of our infrastructure. We can’t even imagine a world without it. That’s our fundamental goal and mission.
This item first appeared in the Jan. 16 edition of Data Sheet, Coins2Day ’s daily newsletter on the business of technology. Sign up here.
