Buffetted by weak-kneed financial analysts but brimming with his trademark optimism, ServiceNow CEO Bill McDermott has declared his 22-year-old company is now “AI-native” and in hot pursuit of five massive and high-growth markets with a combined opportunity of more than $600 billion.
Nearing the end of his seventh year at ServiceNow, McDermott has compiled a superb record of unique market vision, early and unflinching commitment to AI, revenue growth, strategic acquisitions, and expansive partnerships.
And while the Wall Street knicker-knotters and hand-wringers who can’t comprehend the powerful ongoing fusion of applications and agents helped gouge about $100 billion from ServiceNow’s market cap over the past 18 months, McDermott is more bullish than ever before.
McDermott opened the company’s Q1 earnings call with this juxtaposition of reality versus fear-driven confusion:
“There’s a lot of noise out there, so let’s get straight to the point. Here’s the ServiceNow update: we’re the AI Control Tower for business reinvention in the center of a growing $600 billion-plus total addressable market. We have:
- a $28 billion RPO business that’s growing at 23.5% year-over-year,
- the most open enterprise platform that protects customer choice,
- growing numbers of active users on our platform,
- thousands of partnerships around the platform expanding daily,
- AI-native packaging and pricing on our fully autonomous platform meaning no ‘AI sidecars’ at ServiceNow, and
- a world-class team with a proven track record of building truly global businesses at scale.
Our first quarter results are consistent with a company of this stature, once again exceeding our guidance metrics across the board.
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Building on that high-level view, McDermott then outlined where he intends to focus all those assets and momentum now that his company has achieved the “AI-native” status that he’s been pursuing for several years through both acquisitions and internal development.
And in classic McDermott style, he then framed his vision with some bold claims about ServiceNow’s ambition — and for those with doubts about McDermott’s ability to deliver in these crazy times, he’s hit every goal he’s set during his 6.5 years as ServiceNow CEO.
“The company is on track for our best year ever,” McDermott said, adding that “There has never been a tailwind for ServiceNow like AI.” And that tailwind is helping ServiceNow chase down five hypergrowth segments.
I’ve chosen to use McDermott’s verbatim comments because he’s a highly gifted orator and he’s describing entirely new ways of using technology to drive business growth and innovation, so I’d like to let you see his vision in his own words.
- Core ITSM business. “Today, an average Fortune 500 company has 100 million lines of custom code to manage their business. This excludes the code in other systems of record where there are billions and billions of lines of code. As code volume increases 20x by 2030, the complexity of managing this explosion of code will increase exponentially. The volume of tickets generated by this complexity will also explode. In this scenario, the number of tickets hitting an ITSM system will increase by 50x compared to today. The biggest IT buyer in the enterprise was, is, and will continue to be the CIO. This remit will substantially expand by the complexity of the agentic business. ServiceNow’s relevance grows in direct correlation with the expansion of innovation across the AI ecosystem.”
- AI security. “Here’s the problem: companies are deploying agents with zero visibility, therefore they’re unable to see the unmanaged IoT, OT, and medical devices lacking unified access control with no coordinated way to remediate vulnerabilities before they become breaches. Today, ServiceNow addresses this challenge holistically. As the asset intelligence foundation for the AI Control Tower, Armis solves visibility, real-time agentless discovery of every asset, IT, OT, IoT, medical devices, shadow IT, which is a continuously updated map that traditional tools can never achieve. Nine out of 10 Fortune 10 companies already rely on Armis. We’re excited to deploy it throughout the top 2,000 and beyond. In addition, Veza solves for identity governance as its patented access-graph technology maps access across people, machines, and AI agents in real time. Dynamic, context-aware permissions that are governed continuously, not set once and forgotten. This is the active directory for AI agent identities…. Our existing billion-dollar-plus security business ties everything together as the action layer for the CISO. Armis asset visibility plus Veza’s identity governance plus ServiceNow’s business context, CMDB, equals a unified end-to-end security stack that can see, decide, and act across the entire technology footprint.”
- AI-native CRM. “We say ‘AI Control Tower for business reinvention’ because there’s no more-immediate need for reinvention than legacy CRM. It’s a little ironic that a category promising a 360-degree view of the customer has left most enterprises spinning around in circles…. A multi-market European telco faced 85+ fragmented applications, no standard quoting process, and a CPQ setup where introducing a single new product took three months. ServiceNow Sales CRM with CPQ collapsed this to one week. A global power-technology leader across 190 countries has gone live with phase three of its ServiceNow deployment, replacing legacy CPQ. Using AI-driven blueprint automation, the company is reducing new product introduction time from six months to six weeks…. Because legacy CRM represents such a significant expense line for enterprises, the demand for an AI alternative is immediate. ServiceNow is not only bringing a technologically superior solution, we help customers swap out legacy SaaS vendors and go live fast with AI.”
- AI-native front door and employee experience. “As people use more of their AI tools like ChatGPT, enterprise leaders urgently want their employees to enjoy a clean conversational experience. ServiceNow introduced EmployeeWorks, combining Moveworks, conversational AI, and enterprise search with ServiceNow’s unified portal and autonomous agentic AI workflows. This is available in Teams, Slack, or any browser to turn natural language requests into governed multi-system execution for nearly 200 million employees so far. We launched midway through Q1 and it’s already closed many deals above $1 million…. As more employees converge on our conversational experience, ServiceNow will deliver intelligence from any source, putting AI to work for people.
- Workflow Data Fabric. “We all know that AI is only as valuable as the data itself. Enterprises are frantically organizing and cleansing data from countless disparate sources. Workflow Data Fabric connects data across systems. It adds business context via a unified data catalog and applies policy-based governance controls. With ServiceNow, AI understands how an enterprise actually works so they can take trusted action.”
Final Thought
Over the past few days, it appears that some of the linguini-spined “experts” who created and foisted upon us the whole “SaaSpocalypse” lunacy have — after 18 months! — come to understand that AI is not obliterating SaaS and is instead changing it and making it more valuable to customers.
And while ServiceNow is not a SaaS company — a point McDermott has made vehemently over that crazy year and a half — it was caught up in the madness because its business model included subscription.
Let us hope that the current mini-trend toward rational thinking continues for the entire industry. And in the meantime, we can keep an eye on this insightful line from McDermott:
“There are a lot of things AI can do for your business, and we love them all. There’s also a lot of things AI can do to your business, and we want to protect you.”
