ServiceNow is a digital workflow platform that has its roots (and largest usage) in IT Asset & Service Management at Enterprises.

ServiceNow is a shining example of the outstanding success that a SaaS company can achieve when it combines a vision with perfectionist execution.

Its success is founded on a product architecture that enabled it to be extended to limitless use-cases over the years, a visionary team that was aware of market forces and steered the company along the right directions, and a get-it-done-yesterday attitude to execution.

The Story

  1. Founded in 2003 by Fred Luddy. Highly extensible design - initially a swiss army knife software, that can enable teams to build apps on top of their DBs. A primitive low-code no-code platform
  2. PMF - designed for IT managers to track service requests. However the architecture allowed the company to solve use-cases for marketing & customer service also.
  3. Early success - CERN was an early adopter, building 400 mini-apps on top of ServiceNow. In
  4. From startup to scaleup - 2008 - Success & PMF - keeping the lights on, amidst the major usage across customers.
  5. Customer Success - Hired Frank Slootman to scale the company. Problem number 1 was keeping the lights on 100
  6. Evolution from helpdesk software to ERP for IT:

Frank Slootman: We fairly quickly started to look at evolving our positioning from help desk replacement to what we refer to as the ERP for IT. The idea was that IT would have its own system of record, it would have its own platform where all the functions of IT would be, you have a single database and a fully integrated system. That had never been done, and people looked at us like, what? ERP for IT? What are you talking about? You’re a help desk replacement tool.

Here’s the important thing. Now, everybody in IT is going to be licensed on ServiceNow, not just that small group of help desk management people.

We just said, look, if you work on IT, and you don’t have a login to this system, what are you doing here? Obviously, from a business model standpoint, you can now sell 40, 50 times as many licenses to the same customer, because we would go in and say, yeah, we’re not here to license your help desk management staff, which is a very small group of people. We’re here to license everybody, including you, Mr. CIO.

  1. VMWare offer - to purchase ServiceNow for $2.5 billion. Now it stands at $220 bn. While Frank Slootman and Fred Luddy were ready to sell, ServiceNow only entertained an offer to sell

The only question that matters is, what can this company be five years from now, seven years from now, ten years from now?

  1. IPO - In 2012. Within a few years of the
  2. Enterprise SaaS behemoth

Core Value Prop

Large orgs function via their workflows. A major chunk of the work of Support functions such as IT and HR is in receiving and processing employee requests. A workflow looks like:

  1. Customer raises a request (formalized as a ticket by workflow systems)
  2. Internal workflow is initiated - request is routed to the right department / personnel, who may take it further forward if multiple teams are needed
  3. Employee raising the request gets inputs into the process details while workflow is ongoing
  4. Employee get their request processed

This workflow remains as true in 2024 as it did in 2003. The amount of friction, and the customer’s expectation of friction, have reduced dramatically.

ServiceNow is the most reliable partner for Fortune 500 enterprises when they seek to streamline their IT & Support functions.

How is ServiceNow used

  1. End Users
    1. Employees report IT issues through ServiceNow’s self-service portal
  2. IT Support teams
    1. Incidents are logged in the system and severity is categorized by using AI
    2. Cross-team collaboration is enabled within the platform. The user doesn’t need to run from pillar to post, but instead the stakeholders communicate with one another
  3. Analysts & Managers
    1. Continuous monitoring of IT incidents via dashboards
    2. Bottlenecks are identified using Process optimization tools
  4. Business Leaders
    1. Track business relevant KPIs such as Mean-time-to-resolution (MTTR) and Satisfaction scores.
    2. Insights from metrics can help guide resource allocation/ process redesign

Let’s take this example from Acme Enterprises:

Example Workflow

  1. An employee reports a laptop issue via the ServiceNow portal.
  2. Virtual agent dynamically collects additional information using tailored questions
  3. The incident is automatically assigned to the IT hardware support team (based on predefined rules).
  4. Support team resolves issue within SLA timelines; employee is kept updated through automated notifications.
  5. Feedback is collected from the employee to measure satisfaction.
  6. Incident trends are analyzed monthly by managers to identify recurring issues and identify areas for process improvement.

This structured approach ensures faster resolution times, improved user experience, and enhanced operational efficiency for Acme Enterprises.

The Product

It is built on top of Now Platform.

ServiceNow is leading with AI Initiatives

Now Assist

RaptorDB

Revenues breakdown by workflows

On track to achieve $10.66 bn in revenue in 2024. Targeting an Operating income of $3.14 bn. (non-GAAP operating margin is 29.5%).

As of December ‘24, ServiceNow’s Market cap stands at a robust $230 billion.

The company also reports current remaining performance obligation - revenue deferred for future services + contractually obligated revenue - for the next 12 months. cRPO grew from $7.43bn to $9.36bn YoY from FY23 to FY24.

Revenue Growth continues on the back of strong Enterprise GTM & Product Innovations

With revenue growth at 23% and Operating income at 29%, ServiceNow’s Rule of 50 metric is 52% - this is a company executing at an elite level.

ServiceNow has delivered consistently beyond the Rule of 50. We are the benchmark for elite level execution. - Bill McDermott

Gross margins are 79.07%.

In Q3 results:

  1. ServiceNow reported 96 new deals with $1 million ACV.
  2. Second largest new logo deal
  3. Second customer crossed $100 million in total ACV

With Now Assist we have 44 customers spending more than $1 million in ACV, including six over $5 million and two over $10 million, and this continues to be our fastest-growing product ever and an accelerant to our cross-enterprise expansion. - Bill McDermott

Pricing & Revenue breakdown by Workflows

IT Service & Operations Management - 53% of revenue

  • IT Asset management was part of all Top 20 deals, followed by IT Service & Operations and Security & Risk Management

Customer & Employee workflow - 30% of revenue

  • HR Service delivery
  • Customer service management
  • Field service management

Creator workflow - 17% of revenue

  • App Engine
  • Automation Engine
  • Vault

What Customers say

Customer Service Management

“Get your Incidents, Problem Tickets and Change Management streamlined”

“We can categorize our incidents (Low to Sev1) and help prioritize issues that need immediate action by raising their severity…create a Problem ticket for those identical incidents. Once the problem ticket is resolved, the resolution can be drafted in the ticket”

What problem is ServiceNow solving

https://www.g2.com/products/servicenow-servicenow-now-platform/reviews/servicenow-now-platform-review-9532748

  1. Difficult to understand and build for newbie users - strong Partner ecosystem

Links

  1. Substack highlighting ServiceNow’s robust model -https://outperformingthemarket.substack.com/p/servicenow-high-quality-software
    1. cRPO is outstanding
  2. Q3 analysis - https://www.investing.com/news/stock-market-news/earnings-call-servicenow-reports-robust-q3-growth-raises-2024-outlook-93CH-3680440
  3. G2 Reviews:
    1. https://www.servicenow.com/lpebk/hl-g2-reviews-app-engine.html
    2. https://www.g2.com/products/servicenow-it-service-management/reviews
    3. https://www.g2.com/products/servicenow-customer-service-management/reviews
    4. https://www.g2.com/products/servicenow-servicenow-now-platform/reviews
  4. Perplexity research - https://www.perplexity.ai/search/i-am-researching-servicenow-bu-hVObDtW1R..1xKtcOgKkfQ
  5. Sequoia Podcast on ServiceNow - https://www.sequoiacap.com/podcast/crucible-moments-servicenow/