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ServiceNow pushes into new markets as founder earns a break


Fred Luddy’s been writing code for 44 years, but 13 years ago he became best known for founding ServiceNow. Since that time, the firm has expanded from its core IT service management roots into areas such as customer service, security and HR.

So Luddy’s due a break and it’s one he’s about to take, stepping into an advisory role at ServiceNow as the firm continues to expand into new areas. CEO Frank Slootman argues that Luddy’s impact has been vital:

He’s one of a kind and the company obviously has grown up around him over the last five years. When I joined we got about 250 people here, we’re now at whatever we are, 4,300. So, there’s a ton of talent. Over the years, we have definitely sort of enabled Fred to sort of scale back his day to day because he’s been doing some heavy lifting for a very long time.

So, we’re actually thankful that we’ve had him as long as we’ve had him and we’re really able to take this in stride. There’s a lot of talented people at ServiceNow, a lot of different product lines in our platform. And I think the difference is Fred will be around, he’ll be in an advisory capacity. The only difference is he’s not going to be riding coat day in, day out and I think he’s earned that break.

For Slootman and his executive team, the challenge is to take ServiceNow into its next phase and that means expansion and consolidation into a number of key markets, not the least of which is customer service management , an offering launched a few months back at the firm’s Knowledge16 conference in Las Vegas . It’s off to a good start, says Slootman:

We now have 40 total customers, 30% of which are new to ServiceNow and 31% of which are Global 2000s. Customer service management also participates in broader transactions. For example, we signed a $500,000 deal as part of a larger $1.3 million upsell to a medical equipment company. The customer also integrated Field Service Management to drive down costs and improve service delivery.

Obviously, we’re still moving from a small base, but the response we have from the marketplace suggests that what we’re doing is resonating.

Moving into this space clearly puts ServiceNow on a seeming collision course with Salesforce, which has itself announced plans to push into the field service management market. Slootman plays down the potential for conflict:

We’re not at tit-for-tat with Salesforce.

He adds:

We are replacing a lot of legacy systems, home grown systems. It’s not that different in that regard from what we’re doing on the service management side and the operations management side, very similar dynamic. We typically take up stuff that’s very, very old.

ServiceNow is approaching this market in a different way, argues Slootman:

We really bring the holistic integrated service model to the customer, which really adds to the engagement model, to the engineering and root cause analysis aspect, to the change operational processes, all in one single integrated approach.

For people that come from that world, which is typically the IT crowd, they go, ‘Yes, that’s the right way to do things’. So we often get traction where that integrated holistic model is viewed as a really, really core advantage. That doesn’t apply to every single customer service opportunity, but in the world of Internet of Things (IoT) and expensive capital equipment type of service models, I think we have the right approach and we’re seeing the traction. This is a very large business. It’s probably the single largest market that we’re operating in, so we can really invest in this area for a long time to come.

Security opportunity

Security operations is a sector in which ServiceNow launched last December , fleshed out last month by the acquisition of BrightPoint Security to expand its footprint in security analysis and response. Since December, ServiceNow has racked up 32 customers in the security sector, including its first $500,000 plus deal.

This is a natural area of expansion for ServiceNow, says Slootman:

I think most people don’t realize but this is really a very close adjacency to our core business. It is very typical that Chief Security Officers (CSO) report to CIOs. Many, many times when we host large customers at our executive briefing centers, the CSO is there. These days we’re actually making sure that we invite CSOs in, but the whole offering is about combining the IT and security teams into a single system, single work flow, single set of analytics and so on.

This is not a replacement market in terms of existing vendors, he adds:

We’re replacing people staring at spreadsheets all day long. There’s nothing there. It is the most amazing thing that in a world of cyber security, there’s been so much focus, so much investment, on enforcement, on vulnerability scanning, on detection, and then what happens in the back end in terms of the analysis and response. It’s a complete dearth of solutions.

This is what presents us with this extraordinary opportunity. Because security lives so close to IT, it doesn’t take people very long to recognize the significance of what we’re bringing to the security equation. That’s where our excitement comes from. It’s a not a replacement market, the reality is there’s nothing there.

As for ServiceNow’s prospects here, Slootman says:

Our ability to filter signal out of noise is incredibly impaired in a world of security. It’s done by people right now, rather than by systems. The ability to execute on the workflow, is what comes after that. Now this is really a whole back end of the cybersecurity workflow that we are addressing and investing in. We think this is going to become a major, major market. It is inevitable, somebody’s going to get it, and it might as well be us.

Finally there’s the drive into the HR market , where Slootman says deal values continue to increase, including a recent $1.4 million HR-led deal for a new public sector customer in Australia. Such deal sizes would seem to suggest that the HR offering may be reaching some kind of an inflection point. Slootman posits that it’s probably going to take a quarter or more to judge on that:

But what we’re seeing in all our emerging product lines is that the sustained focus and investment that we’re making is really starting to push us over the edge.

What Slootman is confident of is that the firm has the right structure in place to make it viable to move into new markets more easily:

About a year-and-a-half ago, we really changed our organizational model, how we build, how we support. How we go to market is really by product line now. It just takes time for us to sort of reach critical mass there and there’s a sort of a tipping point where things really come together on a lot of different vectors. We’re starting to see the effects of that.

We have so many irons in the fire now, we have a lot of hot products. There’s just a ton of opportunity for us to prosecute and deploying the resources to be able to do that is really what we’re focused on. I don’t want to get too far ahead of myself of knowing exactly how that mix is going to play out here in subsequent quarters. We’re just happy to be able to go to market with a lot of interesting value propositions that make a lot of sense together.

My take

ServiceNow continues to impress in its execution as it moves into new vertical markets. The departure of Luddy is a symbolic change, but not one that will impact negatively on that in 2017 and beyond. The future lies this way.

Image credit - ServiceNow

Disclosure - At time of writing, Salesforce is a premier partner of diginomica.

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