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ServiceNow Idea Proposal (NOW)

ServiceNow Idea Proposal (NOW)
 

Which of ServiceNow’s new and emerging products, both within and outside its IT segment, will drive the company’s growth over the next three to five years?

Report Available: August 27, 2020

 

Blueshift’s initial research found NOW thriving with an ever-growing portfolio of workflow software solutions. Its Q3 guidance set off some alarm bells but NOW executives insist the company’s fundamentals are strong. NOW will have to continue to innovate within its core ITSM segment, as its growth is dependent on existing customers adding new products. A series of emerging products in new areas like customer service and human resources also show huge promise.

 

Observations

  1. NOW, a developer of cloud-based enterprise software, continued clicking on all cylinders in Q2 as subscription revenues surged 32% to top $1 billion. The robust results caused the company to raise its full-year revenue guidance to about $4.2 billion, which would represent 30% year-over-year growth. The company’s Q3 guidance of just 16% to 18% growth in subscription billings raised eyebrows, however, with some analysts wondering aloud if the coronavirus pandemic had caused some enterprises to pull forward investments as part of their digital transformations. But NOW executives said some renewals had shifted to Q2 to align with other contracts and some had pushed out to Q4–neither affecting overall revenue expectations.
  2. NOW’s signature product–its IT Service Management platform that helps companies track and respond to technology service requests–has carved out a dominant position, posting revenues triple that of its nearest competitor. Because its ITSM offering is so highly penetrated among enterprises, an estimated 80% of its new business in Q2 came from existing customers. That puts pressure on the company to develop new products to keep growing. Within its IT portfolio, NOW has been adding machine learning and artificial intelligence technology–its ITSM Pro package includes predictive analytics tools among other upgrades. Another relatively new IT product, NOW’s Software Asset Management, was named a leader in the most recent Gartner Magic Quadrant and has been among NOW’s fastest growing products since its 2017 launch. As existing users continue to add new tools, NOW boasts 964 customers with annual contract values above $1 million.
  3. Beyond its IT offerings, NOW is gaining steam in areas like customer service management, human resources delivery, risk and security, and financial close processes. The most recent quarter was the company’s best for its security solutions, which were part of 14 of its top 20 deals. The company closed eight deals worth more than $1 million for its HR platform, which now has more than 750 customers. Its CSM offering – which added ZM as a customer in July – might be the product with the biggest addressable market, according to company executives.
  4. NOW dominates the IT service management field because of its laser focus on the incident ticketing process, according to sources in Blueshift’s July 2 report on TEAM. Several, though, said TEAM’s Jira Service Desk has some opportunity to move upmarket and challenge NOW for bigger deployments, and last month TEAM announced the acquisition of Mindville to beef up its asset management and service desk offerings. NOW’s biggest challenges may not revolve around competitors, however. It continues to garner complaints that its licensing model is confusing, with frequent policy changes that make contract renewals difficult.

 

To what extent are new products driving growth within NOW’s ITSM portfolio? Which of NOW’s emerging products, like CSM and HR delivery, are partners and customers most excited about? Which ones can become large businesses that produce multi-million-dollar deals? Where is NOW investing the most? Is NOW’s strategic importance to customers increasing? What is a typical growth path for a NOW customer? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: NOW customers, NOW partners and integrators, and Industry specialists.  

 

Companies: ServiceNow Inc. (NOW), Atlassian Corp. Plc (TEAM), Oracle Corp. (ORCL), Salesforce.com Inc. (CRM), SAP SE (SAP), Zoom Video Communications Inc. (ZM)

 

Research Begins: August 10, 2020

 

To see other ideas Blueshift Research is currently working on, please click here.

 

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