ServiceNow is one of several young SaaS vendors that's converting its position in the cloud into rapid growth. Helpdesk and IT service automation remains ServiceNow's primary focus, but an increasing share of the company's revenues now comes from automation of services elsewhere in the organization.
On April 23, a few days before the start of Knowledge 2014, ServiceNow's annual user group meeting, the 11-year-old firm announced that its revenues increased 62% to $139.1 million in its first quarter. ServiceNow continues to invest heavily in expanding its business. The quarter ended with a net loss of $43.3 million, or $0.30 per share, compared to a net loss of $13.4 million, or $0.10 a share, in the first quarter of 2013.
The average customer contract was up 22%, to $241,000, in the first quarter of 2014, with the company landing one deal in excess of $10 million and nine deals over $1 million.
In a Knowledge 2014 keynote address on Tuesday, CEO Frank Slootman cited banking as an industry that has moved almost entirely to ATM services and customer self-service in the cloud. Education, on the other hand, continues to operate as it always has, with resulting high costs. "The sage on the stage doesn't scale," Slootman warned. Businesses need to find ways to automate more of their services, and ServiceNow provides a platform that allows IT service automation to be generalized throughout the organization.
[What happened last year, at Knowledge 2013? Read ServiceNow Revamp Stars Cloud Provisioning.]
As more of the IT infrastructure moves into the cloud and applications move closer to lines of business, the chief marketing officer's budget sometimes turns out to be larger than the IT budget, with money for shadow IT included in it. "We need IT," Slootman said, "but the role of IT has to change" to a more automated service orientation.
Slootman quoted organizational health expert Patrick Lencioni, author of The Five Dysfunctions of a Team (Jossey-Bass, 2002), who said IT is in trouble when it sees itself only in the realm of technical expertise. It thrives when it sees itself as people knowledgeable in the business "who happen to know technical things. We have to know the business as well as everybody else."
ServiceNow has automated many elements of IT with products such as Problem Management, Configuration Management, and Incident Management. In the process it has defined "five pillars" of defining, creating, and managing the lifecycle of services beyond those provided by IT. "You can take the same standard and apply it to HR, payroll, financial, facilities management, and legal services," Slootman told a crowd of about 6,000 at the Moscone Center in San Francisco.
A recent report on ServiceNow from Technology Business Research said that the firm's attempt to branch out beyond IT has started to gain traction: 34% of its account growth was from other lines of business outside its traditional stronghold. A year ago, revenue from outside IT accounted for just 20% of account growth. "[That growth] demonstrates the company's successful expansion outside of IT and into functional areas, such as HR and procurement," wrote TBR analyst Jillian Mirandi in her April 23 report.
Mike Carraway, senior director of IT shared services at Red Hat, is a ServiceNow customer who is considering using ServiceNow to manage services outside IT. "We're looking at several functions -- HR, payroll, marketing, and credit management, services like that," he told us in an interview. "As an experienced ServiceNow implementer, IT will be expected to lead the effort."
ServiceNow's user interface lends itself to creating customer self-service scenarios, Carraway noted. It also allows customers to consult a knowledge base of commonly addressed problems to find solutions. And the ServiceNow platform itself allows for greater customization of services, while maintaining the five pillars to standardize them.
ServiceNow Knowledge 2014 continues through Thursday. The firm announced Wednesday that it launched ServiceNow Share, an online exchange where customers may share code, content, and ideas on how to use the platform. The exchange already features a customer-contributed facilities management system, a biomedical asset management system, a system for marketing projects, and a loaner request system for different types of equipment.
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