. It is a pretty nice product, lots of functionality, probably too much but that might be our problem...We used to have it as SaaS but performance was so poor that we have our own instance running now.
Service-Now may be among the fastest growing cloud computing players that you never heard of.
The privately held San-Diego-based company, which specializes in on-demand IT management software, recently booked $100 million in annual revenue. Service-Now CEO Frank Slootman, who joined the company from EMC’s Data Domain unit in May, expects to double revenue in the fiscal year ahead.
If Slootman hits his target, Service-Now will be among the larger SaaS vendors. Aside from Salesforce.com, many SaaS vendors are in that $200 million in annual revenue range. NetSuite is projected to deliver annual revenue of $234 million for 2011. SuccessFactors is expected to have 2011 revenue of $313.6 million.
What makes Service-Now interesting is that it is a rarity in the SaaS world: It actually sells to CIOs and IT departments. Most on-demand software players have gotten their starts by selling to chief marketing officers, human resources execs and other business line types. Service-Now’s street pricing is $100 per month per user for a line-up of 16 applications. Volume pricing can bring that rate down to $50 to $60 a month per user.
Service-Now’s biggest problem is branding. To date, Service-Now has largely flown under the radar en route to landing nearly 800 enterprise customers. The company received $7 million in venture capital in 2004 and bootstrapped itself the rest of the way.
In other words, Service-Now barely registers on the Silicon Valley-buzz-o-meter. Now the company has expanded into Silicon Valley and is looking to grab talent. Service-Now has hired 130 new employees over the last 90 days and has plans for another 100 by the end of September.
We caught up with Slootman to talk shop. Here are the key highlights.
- How does Service-Now stand out? Slootman said the company has little pure cloud competition and is focused on IT operations such as helpdesk and service management. “We enable a no hands, no touch approach and automate the workflow to resolution,” he said. “We are IT’s system of record. We’re clearly focused on IT as the core.”
- What’s the on-premise competition? Slootman said Service-Now typically replaces legacy systems from BMC’s Remedy and Peregrine.
- Key customers? Service-Now’s customer base is heavily concentrated in the financial services sector. It counts Citi, Barclays Capital and UBS as key customers.
- Is there a platform as a service play here? Slootman said Service-Now largely created its platform for internal use, but customers began building applications on it. “Our workflow cuts across all applications,” said Slootman. “We cross boundaries with our systems internally and externally. We’re seeing customers build apps that have nothing to do with service management in industries such as oil and gas, the NBA and Blue Cross Blue Shield.”
- Do you do end runs around IT? “We sell to IT organizations, not HR or marketing, but IT,” said Slootman. “IT is our principle customer and we provide the least amount of friction for security and compliance audits. Service-Now isn’t a circumvent of IT. We are the CIO system.”
- Why go public? “You go public for three reasons: Fundraising, brand and liquidity,” said Slootman. “Fund raising isn’t’ the issue. We have a free cash flow model and aren’t in a rush to do anything. Liquidity is nice for employees and initial round investors. But branding is the big one. CIOs take publicly traded companies more seriously.”
- Will you charge for platform as a service? Slootman said Service-Now’s PaaS efforts are nascent and he’s focused on service and systems management, which is a large market. Service-Now is under represented in education, government and healthcare. “I have 95 percent of the market to go with service management,” said Slootman, who regards a potential PaaS business as a byproduct of being in service management.
Related: The SaaS list: A look at current on-demand favorites
