ServiceNow CEO Bill McDermott
- It’s been a year since Bill McDermott stepped down as SAP’s CEO to lead ServiceNow, the cloud vendor that helped pioneer the software-as-a-service industry.
- That turned out to be a smart move as the two companies posted contrasting results.
- SAP, the traditional software powerhouse, cut its forecast amid weakening demand, while ServiceNow raised its outlook which highlighted the growing strength of the cloud software market during the coronavirus crisis.
- “You’re seeing a clear move to the cloud,” McDermott told Business Insider. “You’re seeing a clear move to a very select few platforms that customers and partners have created standards around to drive digital transformation.”
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A year ago, Bill McDermott stepped down as CEO of tech giant SAP to lead ServiceNow, the newer, smaller competitor in enterprise software.
That career move appeared particularly smart this week as the two companies posted drastically different quarterly earnings results that underscored the way that the pandemic is upending the software market.
SAP stunned Wall Street by cutting its revenue forecast which sent its shares plunging on Monday, with CEO Christian Klein warning of “significant investment delays in 2020 in several hard-hit industries,” which triggered a selloff in the shares of other vendors — including ServiceNow — amid worries that the software market was weakening in the raging crisis.
But ServiceNow’s report put those worries to rest on Thursday, as it blew past Wall Street estimates and raised its outlook, causing its shares to rally more than 5%. ServiceNow’s results “were about as clean as they come and should help to restore confidence in the stocks of the better-positioned SaaS firms,” UBS analyst Karl Keirstead told investors in a note on Thursday.”
“I chose ServiceNow for a reason,” McDermott told Business Insider. “You know me long enough to know that I did all my research. I understood that ServiceNow had a world-class platform with products that customers were fanatical about. They love it. We’re going to be the defining enterprise software company of the 21st century.”
Although traditional vendors like SAP, which sell software used to run the in-house data centers of big corporations, are still considered contenders in the rapidly growing enterprise cloud software market, they’re struggling to match the momentum of companies that were cloud-based from the beginning, like ServiceNow,which automates workflow and other business processes. Companies that were born in the cloud clearly have the advantage, according to McDermott.
“It’s really about speed,” he said. “You know where you got to be. And the challenge is how do you get there yesterday? The world isn’t going to stop for any company. So get there in a hurry. Because the companies that can’t get there won’t make it.”
The lead that firms not weighed down by legacy businesses have is widening because of the pandemic, which has led to a sharp pivot to remote work and forced businesses to embrace the cloud and other digital technologies faster, McDermott said.
“You’re basically seeing a world that needed to digitally transform — was in the midst of digital transformation — but it actually accelerated with COVID,” he said. “And we are redefining the world of work, right before our very eyes.”
This was underlined by the company’s recent deal with the NBA and the WNBA which used ServiceNow’s platform to manage their operations and the games of the final games of the 2019-2020 season during the pandemic.
“They managed the whole bubble on ServiceNow,” McDermott said, referring to the special zone created at Disney World to protect NBA players during the tournament. “You’re seeing a clear move to the cloud. You’re seeing a clear move to a very select few platforms that customers and partners have created standards around to drive digital transformation.”
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