ServiceNow Bets on ‘Control Tower’ Model for Tech Transformation

ServiceNow, Chairman and CEO Bill McDermott sat down with RBC Capital Markets CEO Derek Neldner to discuss his company’s growth ambitions and the prospects for the wider technology sector at our Global Technology, Internal, Media and Telecom Conference.

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By Derek Neldner, Featuring Bill McDermott
Published February 15, 2023 | 2 min read
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Key Points

  • With growth built on high customer loyalty and retention, ServiceNow aims to take a big share of the $10.7 trillion market for digital transformation over the next three years.
  • The business is innovating constantly to upgrade its platform, which overlays rather than replaces legacy systems to enable enterprises to work more efficiently and effectively.
  • Offering turnkey solutions to smaller enterprises, through a partnership model, is part of the company’s growth strategy for the year ahead.
  • Over the longer term, business will be transformed by AI-driven applications, including more structured and efficient deployment of talent for critical objectives.

Customer loyalty lifts growth

Economic crosswinds may be buffeting every sector, but the tailwinds for tech are stronger, according to ServiceNow Chairman and CEO Bill McDermott. And the business he leads has positioned itself as the platform for end-to-end digital transformation.

Pointing to the fact that about 85% of the company’s business comes from existing customers, McDermott attributed its success to continuing innovation.

“In 2022, we built 2,000 net new solutions on top of the ServiceNow platform, with two major releases,” he said. “Customers really appreciate the innovation.” This was backed up by “an outstanding go-to-market machine that wants to win.”

He was bullish about future prospects, citing a $10.7 trillion market for digital transformation over the next three years. With every business now obliged to be a digital-first business, he added, tech transformation was high on the agenda of every CEO, and ServiceNow aimed to be the “control tower” for that process.

Supercharging workflow

Key to ServiceNow’s current model is that the Now Platform does not set out to replace legacy systems of record for enterprises. Given current pressures, McDermott said “executives don’t have the temperament to rethink what they’ve spent years building.” Instead, the new platform overlays existing workflow systems – from HR to finance and customer service – enabling businesses to navigate across silos.

Employee experience services now make up a big chunk of the business. In a “work from everywhere world,” this allows businesses to recruit, hire and train employees via mobile, and cuts out friction at a time when the labor market is tight. Customer management that goes beyond engagement to provide direct service is another growth area.

Agility is part of the proposition. McDermott cited an auto manufacturer hit by supply chain disruption, which turned to ServiceNow to reshape its 4,000-strong global supplier list. “They didn’t have three years to rethink – they had three months to get it up and running,” he said. “There’s a need for speed: nobody has an interest in long drawn-out, risky, time-consuming IT projects.”

Plenty of Expansion Opportunities

McDermott points to Japan, India, Indonesia, Vietnam and South Korea as specific prospects for expansion in Asia, but ServiceNow’s geographical ambitions are unlimited: “We’re investing globally.” In sector terms, the business has its eye on telecoms, media, tech, manufacturing, retail and consumer goods.

Government is another target. McDermott sees potential to replicate ServiceNow’s work with the US federal government. “We’ve studied all the governments of the world. Eleven are extremely attractive, five we’ll go after with all we have in the next 12 months,” he revealed.

AI is the future

Looking at industry prospects more widely, McDermott predicted that multi-cloud companies will perform well as business workloads move to the cloud. However, he acknowledged it would be harder for smaller outfits to gain share before achieving scale and innovation.

With tech valuations trending “extremely low,” he saw opportunities for M&A in the sector. Acquisition was not on his own agenda, however he could see no asset in the marketplace that could add more value to the ServiceNow platform than its home-grown innovation.

For the future, McDermott sees artificial intelligence as the game-changer, for its potential to organize and deploy data in new and creative ways. In particular, he foresees expansive HR capabilities in AI, where businesses will be able to better align the skills of their employees with priority projects to achieve their goals.

In the meantime, he predicted tech transformation will continue to accelerate and dominate business agendas: “There was once a time where IT supported the strategy. Now IT is the strategy.”

This article is based on a November 2022 interview from RBC Capital Markets’ Technology, Internet, Media and Telecom Conference in New York.

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