Enterprise software and workplace management orchestrator ServiceNow announced rosy revenue numbers in its Q4 2022 earnings call Wednesday evening, saying that total revenues topped $1.9 billion, which represents a 20% year-on-year increase.

IDC analyst Stephen Elliot noted strong corporate management and the company’s expansion into the workplace experience market as contributing factors in the reported growth.

Most of ServiceNow’s revenue came from service subscriptions, which rose to $1.86 billion in the quarter, a 22% year-on-year rise. The company’s current remaining performance obligations, which represent contract revenue that will be recognized as such in ServiceNow’s numbers within the next 12 months, rose to nearly $7 billion as of the reporting date. That’s a 22% increase compared to the fourth quarter of 2021.

Chairman and CEO Bill McDermott was bullish on the company’s performance, saying that the market conditions that have helped grow ServiceNow’s revenues should remain strong in the foreseeable future.

“Our Q4 surge in new business shows that the secular tailwinds of digitization aren’t going anywhere,” he said in a statement accompanying the results. “The world works with ServiceNow as the end-to-end platform for digital transformation.”

ServiceNow’s substantial growth exceeded profitability guidance, according to CFO Gina Mastantuono, who credited net-new annual contract value gains for much of the surge.

“What’s more, our results were generated with a lower mix of early renewals from 2023, providing us more opportunities to drive further expansion throughout the year,” she said in the statement.

Despite the growth, ServiceNow’s stock price dropped nearly 8% in after-hours trading, for reasons that weren’t immediately clear. McDermott, however, has vowed “absolutely no layoffs in 2023,” according to a report from Bloomberg, bucking a trend among technology vendors of late.

IDC’s Elliot, who is group vice president of I&O, cloud operations, and DevOps, credited a healthy corporate culture for ServiceNow’s continued success, saying that, while rapid growth can sometimes cause companies to lose some of their strengths over time, ServiceNow has managed to avoid that.

“I’d say that they’re hitting on all cylinders,” he said. “I also think that they have been very consistent and focused on what customers are looking for, and translating that into investments in the company.”

This isn’t a surprise, Elliot added, given the strong leadership across ServiceNow’s management ranks. He credited McDermott, in particular, for helping to minimize internal politics and other distractions that can sap a company’s momentum as it expands into new business areas.

“They’ve had so much success with the IT management business,” he said. “And over the course of the past five years, the expansion into field service management, HR, employee experience businesses; [their focus] has continued to drive them.”

ServiceNow, Technology Industry

Workflow automation provider ServiceNow on Wednesday said it remained optimistic about growth for the rest of the year, despite the uncertain macroeconomic environment, hoping the situation will in fact boost demand for its offerings.

“As you know, they (enterprises) are either not hiring, they’re laying people off, and they have to do more with less. We’re built for that,” said Bill McDermott, CEO of ServiceNow, during a call with analysts to discuss the company’s third-quarter earnings.

“They need the computers and the platforms to do the work so that people have a more pleasant experience on the employee side … we take care of that,” McDermott said, according to a Motley Fool transcript

Though the company is not immune to the macroeconomic environment, its sales team is preparing for uncertainties by doubling down on staying closer to the customer to understand their needs, added company CFO Gina Mastantuono.

In fact, Mastantuono said the company will continue to keep hiring for the rest of year, in contrast with several large technology companies—such as Google, Oracle and Microsoft—that have been laying off large number of employees.

“ServiceNow is hiring and will continue to hire and we are investing for growth. So, we are absolutely committed to continuing to build up our world-class, go-to-market organization,” Mastantuono said, adding that ServiceNow will also hire critical engineering staff.

ServiceNow reports robust Q3 results

ServiceNow reported strong quarterly results Wednesday, with 25% year-on-year growth in revenue backed by at least 69 deals that were worth over $1 million each.

The company reported total revenue of $1.83 billion for the quarter, with subscription revenues accounting for $1.74 billon, an increase of 28.5% year-on-year, without considering the effect of currency fluctuations.

Multiple products including IT service management (ITSM), IT operations management (ITOM), Customer and Employee Workflows and Creator Workflows were included in the top 20 deals signed by the company, McDermott added, pointing out the diversification of the company’s products portfolio and increasing customer awareness.

“In Q3, both ITSM and ITOM were in 17 of our top 20 deals, with six deals each over $1 million. Security and risk were in 15 of the top 20 with five deals over $1 million,” McDermott said.

Customer and Employee Workflows were also a part of 12 of the top 20 deals signed during the quarter in question, along with Creator Workflows, which featured in all the top 20 deals, the CEO added.

The company reported that it had a total of 1,530 customers with more than $1 million in annual contract value by the end of September.

The number of customers paying over $10 million in annual contract value grew 60% year‑over‑year by the end of September.

ServiceNow announces new training program

ServiceNow has also introduced the RiseUp with ServiceNow program, aimed at training  one million ServiceNow certified professionals by 2024.

As part of the program, the company will offer 600 free courses along with 18 job-related certification paths.

Service Management Software, ServiceNow, Technology Industry

What’s in a name? For Chris Bedi, who joined ServiceNow as CIO in September 2015, a lot: the company recently gave him a new title, chief digital information officer, and rebranded his IT team as “digital technology.”

“The rebranding is an acknowledgement of how the role has changed,” he says, but is also intended to reinforce various mindsets that he wants the whole team to adopt.

When Bedi joined the company, his primary mission was to enable “scale-for-growth.” Back then, he says, the company had around 2,800 employees, a quarter of the headcount today, and was still seen as an IT solutions company as its other workflow management products hadn’t yet taken off.

His role included the familiar responsibilities for IT infrastructure, network connectivity, cybersecurity, delivering collaboration and communication tools for existing staff, and provisioning them for new employees so they have what they need to be productive from day one.

Another big component of the job back then, he says, was keeping the information needed to run the business “at our fingertips.” These analytics tools were basic apps, but not trivial, he says.

AI and machine learning were only just beginning to creep into discussion of analytics in 2015, and the ServiceNow team devoted to the technology was tiny.

“At the time, we had a team of three people focused on AI and ML who were largely — this is 2015, you have to remember — just running experiments on AI and ML,” Bedi says. “Nobody knew what the heck to do with it; nobody had really bought into it. But these were data scientists tinkering with data, producing some insights.”

That’s changed in the intervening years, of course.

Digital brain

One milestone for the analytics organization came in late 2018, with a shift in focus away from dashboards and KPIs and toward becoming a digital brain. “We toyed around with the name: digital brain, central nervous system — for the organization,” he says. “We said our mission should become making sure anything that has a rating, recommendation or forecast in our organization is enabled by an AI and ML recommendation.”

That mission soon evolved again, into helping every persona make more effective decisions, and now results in over 3 million recommendations per day, he says. “Surfacing AI and ML recommendations is great, but unless we’re also prescriptive in terms of the actions we want people to take, and give them a closed loop, a human in the loop, to tell us whether those suggestions were useful, we’re missing the mark.”

The way the analytics team analyses its own performance has also evolved, from a count of monthly active users of the analytics products to a focus on their satisfaction with the recommendations they are receiving. “It has to be, ‘What’s the percentage of actions recommended versus actions taken?’ That was a big shift,” he says.

Bedi’s responsibilities have grown in other ways too. While his team isn’t responsible for the Now Platform infrastructure on which the company’s SaaS offering runs, it does maintain the Now Learning training platform and  ServiceNow Impact, a customer success app for helping clients track their digital transformations.

Cybersecurity is no longer just about protecting corporate IT infrastructure, but also the company’s revenue-generating cloud, and even ensuring that customers are using the company’s services securely to mitigate reputational risk.

And scaling the company has moved from simply supporting more employees to getting the most from existing staff. “The purpose of this is to drive an incredible employee experience that helps our employees be more engaged and productive,” he says. “If I zoom out, the role has evolved from largely internal, scale and risk mitigation, to very externally focused, critical to driving our strategy, critical to driving growth, and looked at as a lot more strategic than in 2015.”

Embracing citizen developers

Bedi says he’s a voracious reader, but also has a strong bias for action when it comes to picking up new skills. “Let’s go do it and figure it out as we go,” he says. “People use the term ‘fail fast’ but I like the term ‘learn fast’ better.”

That was his approach when it came to the adoption of low-code development tools internally at ServiceNow.

“We were having one of those debates with no finish line around citizen development,” he says. Those in favor wanted to see the benefits right away; those against feared an accumulation of technology debt in the organization.

In situations like these, he says, there are three choices as CIOs. “You can try to block it — but you’re never going to win that battle,” he says. “You can ignore it. That’s what you’re doing today, whether you know it or not, because people are out there already with point solutions. The only logical choice left, and this is a conversation I had with my team, is to embrace it. So, we embraced it.”

ServiceNow’s employees have embraced it too, with over 400 of them active as citizen developers, 100 applications in service, and another 100 applications due to go live in the next couple of months, Bedi says.

As progress gains momentum, he has some advice for other CIOs getting ready to embrace citizen development in their enterprise. First, he says, keep governance lightweight yet sufficient. One way to do this is to provide trusted data sets for things citizen developers are sure to want, which must be done properly to avoid things breaking — something like an organization hierarchy and an employee directory for apps involving approvals, for example, or a cost-center hierarchy for anything involving spending.

Second, he says, avoid discouraging new developers by limiting the reasons for refusal of a project: no duplicate apps (although replacing an app with a better one is allowed); no getting in over your head (so if an interesting idea looks likely to be too complex for the citizen developer, his team members may step in to help); and no handling of overly sensitive data (but if the idea is good, his team may take on the project).

His third recommendation is to make it easy for people to get started. His team did this by providing an introductory class — “It was short enough where people wouldn’t be discouraged,” he says — and holding office hours where citizen developers can call in for help.

Finally, he advises, amplify success by celebrating the citizen developers’ applications. “I have a selfish interest in this program taking off,” he says, “because they’re helping with one of my core missions: digitize the enterprise.”

If citizen development is handled correctly, and if CIOs, CDIOs, and CTOs can embrace all these people, Bedi says, then we can do away with the term shadow IT and its negative connotations.

And perhaps this will help with another problem he and CIOs like him face: the shortage of skilled software developers. “I can never get enough of them,” Bedi says.

Analytics, Application Management, Artificial Intelligence, CIO, Digital Transformation, IT Skills, Machine Learning