Sign up for our newsletter - Navigating the horizon of business technology​
Technology / Hardware

The Big Interview: Bill McDermott, CEO, ServiceNow, on Life After SAP

Bill McDermott has lived a colourful life. Long before he was a high-profile CEO (SAP, and now ServiceNow) he worked three hourly wage jobs to buy a small deli aged just 16, using its success to put himself through college. It’s a classic rags to riches tale, and although we won’t rehash his entire career (a memoir: “Winner’s Dream: From Corner Store to Corner Office” does that nicely) the ambition shows no sign of easing.

It was on trademark display during ServiceNow’s earnings this month, when he told investors that he’s focussed on making the business the defining enterprise software company of the 21st century.” (It’s a grand vision, but “most people massively overestimate what they can do in the short run, and massively underestimate what they can do in the long run” he later told Computer Business Review on a Zoom call.

A tidy soundbite: but few would bet against McDermott – who headed from his family’s home in a working class Long Island neighbourhood to an interview at Xerox’s Manhatten offices in a $99 suit back in 1983. As he recently recalled, the family’s house had flooded that day. “My brother Kevin put me on his shoulder, carried me in the street so I wouldn’t get the (suit) pants wet. I guaranteed him I would get the job.” (He did — and rose to become Xerox’s youngest ever corporate officer.)

Now, 27 years later, he’s nine months into a fresh role after surprising many when he stepped down from German software firm SAP in October 2019. He’s on a roll again too: the Bay Area-based company, which specialises in workflow improvements, is among the tiny few companies to have actually out-performed during the pandemic, hiking its annual outlook and growing its workforce by 20% as others battened down the hatches.

White papers from our partners

 

Impressive performance in the face of broader economic headwinds, but the company remains far from a household name even as its list of blue chip customers grows. So what exactly does ServiceNow do, and where does it fit into the modern IT stack?

The cloud native company has a host of offerings, built around Platform-as-a-Service enterprise management software that spans field management, finance, HR, IT service management (ITSM), legal, marketing, and more. API-led integrations allow users to build low code applications and automate common business processes – typically on top of existing enterprise software systems, for example from SAP and Oracle.

Plug it in to your Oracle systems, and com.snc.asset_management will help manage assets, consumables, and software licenses, for example; com.snc.expense_line integrates with asset management, configuration management database, cost management, and contract management, while com.snc.vendor_performance provides capabilities to measure, manage, and track vendor data and compare performance characteristics in graphical views. Other integrations abound.

It’s a sprawling range of capabilities that Disney used to build customer service management for its recently launched Disney+, which now names 50 million customers, and ServiceNow is adding fast to its collection of similar lighthouse customers.

McDermott cites 40 deals greater than $1 million during the quarter, bringing ServiceNow to 964 customers paying more than $1 million annually, with Disney, Goldman Sachs, Zoom, and JP Morgan all named on the earnings call. (The latter was ServiceNow’s “largest IT business management and our largest DevOps deal ever.”)

As the CEO puts it: “We don’t compete with anybody. Our goal is to make everybody’s system work better”, and the company jingle, which McDermott repeats enthusiastically, is “making the world of work work better”.

If that kind of sloganeering makes you faintly queasy, then the simplest, one-word explanation of where the company fits is “workflow”. By integrating with the existing, often siloed enterprise software stacks of large businesses, it allows them to improve workflows for employees and customers: “I had a CEO tell me, hey, I want to get a great score on Glassdoor. How do I do it? We can have a low code environment where you simply have a business analyst configure a workflow; he [used this and] rolled out an employee reward program to his employees”, McDermott says.

“We had another company with 23,000 employees in the retail space that basically said, ‘I’ve got a lot of leave requests because of COVID. How do I accommodate those in a simple to use portable application?’ In 96 hours we had the whole company running.”

The CEO adds: “Mobile web and conversational tools have converged. The users in these enterprises want to consume a great experience when they go to work or even if they’re working from home. Every CEO wants to create a great experience for their employees or their customers [and this requires] a great workflow behind it.”

Best for McDermott, one gets the sneaking suspicion, is that ServiceNow is cloud-native and compared to SAP, implementations are fast. Is this a relief after SAP?

 

He’s diplomatic: “SAP is a wonderful company. If a global company wants to have a financial system to meet all the needs in the global economy, which is not an insignificant endeavor, nobody does it like SAP. It’s wonderful.

“But take ServiceNow: this is an easy to use; really quick to implement; fast time-to-value solution, and you don’t have months or even years where you’re implementing this system. You can do it in hours and days. And that’s what people really like, especially in this COVID environment where people are under tremendous pressure and to get systems up and running quickly. But also the CEO and the CFO have to be very tightly integrated in their desires to improve cost. When they invest in something, they have to get a very nice return on that invested capital.

“With ServiceNow and year one, people are getting five, six and sometimes even 10X returns on their investment and service. I had one company in this quarter, for example, that we just announced that literally, literally took a $100 million a year in cost out because they consolidated 223 legacy systems that weren’t adding value.”

As the transcript shows, McDermott is a relentless salesman. (“Right now we have the highest net promoter score in the industry. We have the highest loyalty score in the industry. But loyalty with customers, as you know, is a race without a finish line.”)

The enthusiasm, however, seems genuine. And why wouldn’t it be? He is eyeing a huge opportunity: ServiceNow’s near-term goal is to reach $10 billion in revenue run rate. (It just hit $4 billion) and beyond that, “$30 billion, $40 billion…”

(McDermott cites IDC figures suggesting that $7.4  trillion dollars will be invested in digital transformation in the next three years, around the world.

He notes: “The beauty of a cloud company, the cloud business model is most companies treat this as an OpEx expense, so it goes into the flow of their natural operating expenses… nine out of 10 CEOs have a digital first strategy so they know they have to digitise their business. And digital transformation has an enormous tailwind.” (

One announcement during the quarter’s earnings that seemed to rattle some observers was the retirement of David Schneider, ServiceNow’s president of customer operations for the past nine years. McDermott says he understands why it left some flustered.

“During that time [Schneider’s tenure], we had a 3000% revenue increase.

“So any change is regarded as ‘what’s going on?’ But David still with me and he’ll be working for me in the office of the CEO through the end of the year. He’s simply retiring after 35 years in the business to spend more time with his two children and his wife.

“We all think he’s earned that, right?”

Meanwhile, ServiceNow’s CEO is aggressively hiring.

“We’re trying to build a team for the ages.

“We’re [already] 20% bigger than we were when COVID started. We had 2,300 college intern offers out there and most companies shut it down when it hit. We accelerated it and added more. We want to be an extremely diverse company, whether it’s the black community, the Latino community, LGBTQ community. We want to be a company that has a giant tent where it’s very open. We’re focused on women, we’re focused on women in management. We’re focused on getting in front of every opportunity we can to get great talent and great talent from every single corner of the planet Earth.”

Does McDermott ever unwind from an almost religious focus on work?

“Every day I wake up, I unwind right away” he says cheerfully.

“I mean, so I’m up very, very early, but I don’t immediately jump into email.

“I’ll read three papers online. I like my favorite sports page. I’ll do a light workout and then I’m ready for business and then I start digging into the day.

“So I do think you have to keep your mind curious about things that aren’t just work; have the freedom to imagine and think, as opposed to just constantly being in a tunnel around the job because there’s a big world out there and you’re part of that big world. So I always try to do that. I walk and I love to play basketball. I’ve also adopted an interest in golf. At some point you have to recognize that you’re probably not going to play basketball into your 90s – if you’re lucky enough to be around.

“So I’m getting new hobbies. But then once the day starts, I’m in four continents a day on Zoom: we’re defying the logic of time and travel with digital technology. One thing I think the world has really gained from COVID is the permission to do work smarter. How can it be that we traveled across the world for a meeting that might have lasted an hour or two and then traveled back the other way? I think as much as some constantly being connected to technologies like Teams or Zoom or others is in some ways challenging for people, it’s also quite liberating. And I hope that a lot of the lessons that we’re learning now will continue and civilisation will get smarter about digitisation because it really can add a lot of value to the human condition.”

“Customers have raised the game. CRM tools of the past where you simply knew who the customer was and you understood how to sell them and cross-sell them and throw marketing campaigns at them? That’s old school. Everyone’s got that.

“The new frontier is making sure that their cases are handled, that after you get the customer, you spend immense attention on the technology that keeps them happy, takes care of their cases. We have health care companies with 50 million records where they’re on the now platform taking great care of the customer. You have field service technicians that normally go out and see the customer, you’re looking for more new innovations to predictively maintain things before they go down.

I”f they do go down, you want to be able to electronically remediate this. If you do have to put a person in front of a problem, you’ve got to get the right person right place, right time, right skill set, right tools. That’ll change the margin profile of thousands and thousands of companies around the world. With these edge applications every day is going to be a new adventure. You can see that now. With the emergency response applications of COVID, we invented them in a week and scaled them globally. We now have a suite of applications to bring employees to the workplace safely.

“Sure, many will still work from home. It will be a hybrid environment, but companies will be expected to know, are my people ready to come back if there is an incident? Have I properly quarantined it to protect all my employees? Do I have testing? Do I practice social distancing? Do I have all the PPE inventory management? And do I have a sheet of glass on my iPhone, my iPad, a PC, whatever you’re using, where you can see that you’re running like a true quality company that cares about your people and your customers? To me, this is the moment where executives in every company around the world are accountable to make sure the answer to that question is ‘yes’.”

The company currently invests circa “15, 16%” in R&D and unlike SAP, he suggests, won’t be aggressively acquisitive: “I think the idea and the power of ServiceNow has proven to be organic. You know, many companies have grown through M&A. There’s nothing wrong with that. It’s just that we have a very proud engineering team. We have one architecture, one platform and one data model…

“I keep my iPhone next to my bed and my notes section open: Boom, I’m right into that. If I have an idea, I’ve learned don’t scribble it down because the chances are you won’t be able to read it. So I force myself to quickly put it in there — then I feel OK, probably I can go back to sleep again. We’ve yet to find our biggest idea.

“There’s bigger ideas for ServiceNow; there’s bigger things that we’re going to do, and it’s that constant pursuit that’s on my mind.”
This article is from the CBROnline archive: some formatting and images may not be present.

CBR Staff Writer

CBR Online legacy content.