ServiceNow CEO Bill McDermott Puts Bullseye on CRM Market (and Salesforce?)

Acceleration Economy Cloud Wars

After posting superb Q4 and full-year results, the world’s hottest major cloud and artificial intelligence (AI) company is looking to shake up the customer relationship management (CRM) world as ServiceNow CEO Bill McDermott sees “a tremendous opportunity to take ServiceNow and squarely place it in the customer-relationship management category.”

(Hey Marc Benioff and Salesforce: better check in with Einstein on that — is it just bluster or can high-flying ServiceNow be a serious threat to your CRM hegemony?)

Before sharing McDermott’s thoughts on why that opportunity is so appealing, here are a few quick numbers from ServiceNow’s excellent Q4:

  • subscription revenue up 25.5% to $2.37 billion; and for the full year, it was up 25.5% to $8.68 billion;
  • current remaining performance obligation (RPO) was up 23% to $8.6 billion;
  • $1-million-plus deals: 168 deals in Q4, up 33% over 126 in Q4 a year ago;
  • largest new customer: a $10-million deal with a very large global financial-services firm; and
  • three workflows topping $1 billion in ACV (annual contract value): Technology, which is ServiceNow’s original IT-focused heritage; Customer, which McDermott has called out above; and Creator, which has grown explosively to meet the new needs of developers and the rise of co-creation opportunities.

Ask AnalystGPT about this analysis

ServiceNow’s Imminent CRM Offensive

During last week’s earnings call, as McDermott was describing the wide range of opportunities he sees for ServiceNow’s AI-powered workflows and platform solutions, he zeroed in on not only the huge growth the company is experiencing in its Customer workflows but also the “tremendous opportunity” it represents.

“Think about front-, mid-, and back-office and the fact that we can align all three of those things, and how nobody has to lose for us to win,” McDermott said about his desire to “squarely place [ServiceNow] in the customer relationship management category.”

“We could fill in all the blanks for what the current participants don’t do, especially with their integration problems. It’s just a fantastic opportunity for our customers.”

It’s important to note here that since McDermott’s arrival at ServiceNow more than four years ago, he has been repeatedly used that line about how ServiceNow is playing more than a zero-sum game and that, for it to win, other vendors don’t necessarily need to lose, particularly via the rip-and-replace that customers rightfully regard as appealing as a skin rash.

I believe that approach has been a key factor behind the massive growth McDermott has generated during those four years, and that it’s a primary reason why customers have demonstrated great love and affinity for the ServiceNow brand. But at the same time, McDermott didn’t propel ServiceNow to a market cap of $160 billion — on about $9 billion in revenue! — by avoiding competition in the service of customers.

That’s why I think McDermott’s very clear message about jumping into the CRM business and how that would be “a fantastic opportunity for our customers,” and his sharp point about the long list of things “the current participants don’t do,” give us reason to believe that he’s not planning to simply drop off some leaflets and hope somebody gives ServiceNow a call.

Final Thought

No, it’ll be much more than that. ServiceNow and McDermott are riding incredible momentum in the market right now, and no CEO in the world is better at riding a hot hand than McDermott.

So I believe ServiceNow is about to embark on a very aggressive foray into the CRM space with an attempt to rewrite the rules of that game centered on AI-powered workflows that run end to end across the company and make CRM more fully integrated into the enterprise’s operations and —most important — its data.

Salesforce, a big challenge is surely coming your way. And as is always the case, the biggest winner in this battle within the larger Cloud Wars will be the customers.

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