Bill McDermott Aims 'AI-Native' ServiceNow at 5 Hypergrowth Markets

**Bob Evans** (0:00)
Hello, my friends, welcome back to Cloud Wars Minute. ServiceNow is off to a hot start, not only with its Q1 results, but also in how CEO Bill McDermott is framing where the company is right now, and in terms of that, how that new position, which he says we're 100% AI native, is gonna allow them to pursue five, what he called hyper growth markets. For quite some time, ServiceNow has operated without a lot of direct competitors, and the competitors it had were much smaller than it. Its success and also just the dynamics of the market are pushing other tech vendors into that space, so it's gonna be a more competitive move going forward. And on this Q1 earnings call, McDermott showed his characteristic optimism and bullishness about what's going on there. So I wanted to offer an update about where ServiceNow sees itself right now. First of all, the big thing I think is that McDermott emphasized this point that ServiceNow is AI native. There's been a lot of controversy or at least a lot of talk among the tech community. Now, who is AI native and who is just sort of glossing over applying some AI lipstick to their traditional solutions and technologies?
The term that ServiceNow uses to refer to that latter category is AI sidecars, where they say that's just a little AI glomming onto traditional technology and that's becoming less appealing to customers. So first of all, McDermott wanted to say we're AI native. Secondly, he wanted to make the case that ServiceNow, in spite of what some of the knicker-knotters and hand-wringers on Wall Street have said about subscription services, that this is a market that continues to grow very nicely because of AI and on the backs and power of AI rather than being threatened by or decimated by it. So at the top of the earnings cause remarks, McDermott made the case, he said, we are the AI control tower for business reinvention and right in the center of what he said, a total addressable market that's more than $600 billion.
Now, in the past, they've talked about ServiceNow as the company for AI transformation for business transformation. Now he's talking about business reinvention. So interesting new term here and that's the position that McDermott wants the company to take. A couple among the highlights he pointed out to support the strength of the company, he said, we've got a $28 billion RPO, remaining performance obligation that grew 23.5% in Q1. And he said, in addition to that, he said, we've got the most open enterprise platform. Now that is a claim that a number of tech vendors are going to make. But it's interesting that McDermott chose to put this out there as one of the points that truly distinguishes what ServiceNow is doing, that need for openness. And then he mentioned these five specific, what he called hyper-growth markets, that are at the top of the ServiceNow list of priorities. First, the core ITSM business. He said, with the complexity that's going on in enterprises and the more reliance on data that's going to be taking place here in the AI era, he said, we're going to see a 50x, not 50%, 50x boom in the number of tickets that are being sent through for IT support. He says, this business will be more important than ever. He talked about the significance of AI security built for the AI era and the capabilities of acquisition of Armis and Vesa will bring this service now. He talked about AI native CRM. And this is a point that over the last few years, McDermott has made a number of times traditional CRM. And he doesn't always say it, but he means Salesforce is just not up to what's going on now, Salesforce clearly has updated its game as well. AI native employee experience. He talked about what's going on there with Moveworks and the changes that ServiceNow has made to that and how that's going to simplify things and help bring down that anxiety some people have about AI. And finally, he said our workflow data fabric, which helps pull all the data together. So essential for what's going on now with AI.
A lot of this was classic Bill McDermott, right? Setting a big high level vision, optimism and so forth. And some people have said over time that McDermott is, you know, just a super salesman, but the results he's generated at ServiceNow, it's almost seven years since he's been there, demonstrate that he is not only able to speak in these growing terms, but he's able to deliver excellent results time after time after time. I think ServiceNow has become a leader in a lot of ways here, a thought leader. And I think what McDermott's described here pushes that forward. I've got a lot more details and I offer a lot of verbatim commentary from McDermott in an article that'll be up later today on cloudwars.com. Thanks for being with us here at Cloud Wars Minute. I hope you have a fantastic day.