​ServiceNow: A quiet cloud disruptor

ServiceNow's 2015 outlook highlights how the company is expanding beyond IT management into business management. Will it ultimately run into Salesforce and more high profile cloud vendors?

ServiceNow is hitting an inflection point in its expansion beyond information technology service management and now eyes $1 billion in 2015 revenue.

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Given projected revenue growth of 41 percent to 47 percent for 2015, analysts are arguing that ServiceNow is one of the more disruptive cloud companies.

ServiceNow on Wednesday reported a fourth quarter net loss of $44.7 million, or 30 cents a share, on revenue of $198 million, up 58 percent from a year ago. Non-GAAP earnings were 3 cents a share. Those results were better than expected.

In the fourth quarter, ServiceNow added 211 net new customers for a total of 2,725. For 2014, ServiceNow reported a net loss of $179.4 million, or $1.23 a share, on revenue of $682.6 million, up 61 percent from a year ago. The non-GAAP loss for 2014 was 7 cents a share.

But ServiceNow's outlook is what had analysts gushing. Basically, ServiceNow is expected to go from about $1 billion in revenue in 2015 to $4 billion by 2020.

For 2015, ServiceNow projected revenue between $960 million and $1 billion with most of that coming from subscriptions. How'd ServiceNow become such a juggernaut? First, the company managed to hit a sweet spot with IT service management delivered via the cloud. And then ServiceNow took its services model and expanded it to other self-service areas such as HR. ServiceNow is replacing manual processes such as employee on boarding.

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In a nutshell, ServiceNow has managed to become a business service management platform, aligned developers and has a community of 30,000 registered members. ServiceNow's hiring highlights the business theme. Many of the people ServiceNow has been hiring have ERP backgrounds from SAP and Oracle.

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CEO Frank Slootman explained ServiceNow's approach on the company's earnings conference call.

We're selling service management. We're not selling an IT flavor, an HR flavor, a facilities flavor. So our whole thrust is to get enterprises to really embrace and adopt service management for the enterprise, and there's multiple flavors of service management typically under consideration that our customers want to implement and deploy.

If anything, we're trying to erase those boundaries and not have our customers view us in terms of those individual solutions, but really take an enterprise view of service management and adopt it as a platform to implement a service platform for numerous service domains. We talked a great deal about HR and facilities, and the reason is those are adjacent service domains. They are typically the low hanging fruit, but there are literally hundreds and hundreds of other applications. Some of them are very fine granularity, other are much broader.

Of course, the big question for ServiceNow and its growth prospects revolve around what other cloud players it may run into. Workday and Salesforce are obvious potential rivals. "The firm is one of three firms that we believe could legitimately become a next generation platform - alongside Salesforce and Workday," said Canaccord Genuity analyst Richard Davis.

Slootman addressed the cloud field.

So we're definitely farther afield from Workday than we are from Salesforce, in the sense that I think Workday and us have a fairly good balance relationship in terms of what they do, what we do. There is not a lot of overlap.

Sometimes there are some processes that probably either company could tackle, and it depends on various factors whether a customer goes this way or that way, but on the whole that's fairly well delineated. Salesforce lives much closer to where we are because of Service Cloud, because of Force. There are many more opportunities for us to sort of get into an overlapping motion.

When you strip away all the jargon and the alphabet soup, we're all workflow orchestration platforms, and we can tackle a very wide range of applications, whether they are external like CRM or whether they are internal like service management. And it's no surprise -- and by the way, Salesforce is very well aware of this. There's no secret here.

The market is very large, so as a result, we are not bumping into each other every minute of the day. But as the company's get larger, and we all are getting larger here, I think the potential for contest is going up. Certainly our customers understand this as well. That when you peel away the veneer and the jargon and the rhetoric, the core capabilities all move on a similar set of issues.

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