ServiceNow: Expanding quickly beyond IT service management

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ServiceNow is growing at a rapid clip and bridging from IT service management into HR and other areas with its platform. The company is worth some due diligence since it could make traditional IT buyers more relevant in the enterprise.

ServiceNow is best known for managing information technology service management through its cloud but its platform is increasingly being used for everything from human resources to custom applications.

Why does that matter?

Should ServiceNow's master platform plan work---and it appears to be working with large enterprises now---the buying cycle goes through the IT department again. That fact alone should spark some due diligence interest in the CIO office. ServiceNow will host its Knowledge conference next week and is likely to shed light on its product roadmap.

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The reality today is tech buying power doesn't reside with IT as much as it does business line executives. I'm willing to bet that a lot of these business line execs will botch projects on the same scale the computer science grads did. Eventually, IT will have to clean these multiple projects up and get some kind of control.

Here's ServiceNow's core pitch:


If ServiceNow's platform delivers business and IT value, the company could become a go-to vendor. On ServiceNow's first quarter earnings call, CEO Frank Slootman said:

We are really expanding people's perspective of service management from an IT context to an enterprise context. And that's what our customers are looking at and that's what they are moving into. Sometimes they're doing IT plus HR, or plus some specific applications. Other times they're really going hook, line and sinker and really are viewing it much more on a global level. And it's really up to us as a sales and marketing organization to make the case for that. But what I think you're seeing is that we're increasingly successful.
We're super-excited about that because that is the main mission of the company to make that transformation in the marketplace from IT service models to enterprise service models.

Slootman added that there are no separate sales models for non-IT service management (ITSM) uses for ServiceNow. He said:

It is true of ITSM, it's usually the starting point because people are replacing legacy systems. But our whole goal with the customer is to really expand their view and the opportunity and what is possible. That is the game that we are playing out there, we are increasingly more successful at that. So we do not go banging around and opening the door at facilities, one with procurement, one of HR, we really go in thru the front door. We use the IT organization as our landing spot if you will, and then we are advocated by IT into the larger enterprise.

HR deployments are the biggest non-IT effort at the moment for ServiceNow, but the focus is services like on-boarding. Slootman doesn't consider ServiceNow competition for HR software players.

In a nutshell, every enterprise asset has a service model attached. For instance:

  • Hospitals will use ServiceNow to manage MRI machines and schedule them with doctors and nurses.
  • GE Energy will use ServiceNow for turbine and power plant management.
  • Any asset with problems, information and data around it can be used in a services model. According to ServiceNow, 34 percent of new transactions in the first quarter for non-ITSM deployments, up from about 20 percent the previous quarter. Thirty four percent of annual contracts signed in the first quarter were upsells. 

As for financial health, ServiceNow is projecting 2014 sales to be between $652 million and $657 million, with growth between 54 percent and 55 percent. The company does lose money on a non-GAAP basis, but has been hiring at a rapid clip. ServiceNow ended the first quarter with 2,103 employees, up 834 from a year ago. ServiceNow added 58 employees to research and development in the quarter.

Meanwhile, the company has 2,195 accounts with 426 Global 2000 customers including BP, Visa and Wal-Mart. 

What you should do now?

  1. Conduct due diligence on ServiceNow's platform and use cases beyond IT.
  2. Ponder how a centralized service delivery platform would work in your enterprise.
  3. Gauge vendors and platforms beyond ServiceNow.

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