ServiceNow And GenAI: Seven Key Takeaways From CEO Bill McDermott

‘Money is moving away from commodity and old tech to advanced cloud technologies and platforms and generative AI. In fact, I'm talking to many companies now that are pulling money from their R&D budget to put it into the GenAI line item so they can get this going. Think about this: 80 percent of the CEOs in various industries today say GenAI will disrupt [their] industry. Ninety-three percent of them have said it is a positive productivity driver for [their] company. So we're selling into a tailwind. This is not a headwind. And this is really big,’ says ServiceNow CEO Bill McDermott.

Making The Case For GenAI And ServiceNow

Few in the IT industry are as passionate about generative AI, or GenAI, as ServiceNow CEO Bill McDermott. McDermott was an early GenAI evangelist. His company’s workflow automation over five years ago was already starting to be infused with AI but pivoted almost overnight to GenAI once that technology first hit the market.

As a result, the new “Pro Plus” GenAI-infused versions of the ServiceNow Now platform introduced last Fall have become the company’s fastest-selling new product, McDermott said.

McDermott Monday told a roomful of financial analysts assembled to attend this week’s ServiceNow Knowledge 2024 conference that GenAI is already here, and that it is imperative that businesses move quickly to adopt the technology.

“Every business workflow in every company, regardless of industry and geography, will be reengineered with generative AI,” he said. “We're talking about a complete intellectual renewal, a renaissance of the enterprise.”

GenAI will help businesses completely re-think their processes and how automation will help automate their workflows, and in the process will result in an $11-trillion opportunity over the next three years, McDermott said. But real success with GenAI will come from focusing on the people in an organization, he said.

“Two-thirds of the personas in the enterprise today will have their work radically changed by GenAI in the next few years,” he said. “Seventy percent of the nonsense and the soul-crushing work they have to do now can be alleviated with the use of technology and GenAI in combination for people.”

ServiceNow is setting the pace for GenAI adoption and McDermott is the technology’s biggest cheerleader. To learn more, read on to hear what McDermott told financial analysts in his own words, here slightly edited for clarity.

GenAI Is Real

[GenAI] is massive. We all know the Internet. We all know the iPhone moment in 2008. We've seen the transition to cloud. This is as big, if not bigger, than all of them. I think it's bigger. And I want you to just think about this in the context of ServiceNow. Every business workflow in every company, regardless of industry and geography, will be reengineered with generative AI. We're talking about a complete intellectual renewal, a renaissance of the enterprise. And this is the platform to do it. IDC has forecasted an $11-trillion economic impact from AI in the next three years. Similarly, they've stated a half a trillion dollars will be spent on enterprise software in the next three years. We intend to get our cut.

What are leaders doing? You cannot talk to a CEO who is not talking to a CHRO [chief human resources officer] and their leadership team about upskilling the workforce and getting AI technology infused in their company to change the game. Two-thirds of the personas in the enterprise today will have their work radically changed by GenAI in the next few years. Seventy percent of the nonsense and the soul-crushing work they have to do now can be alleviated with the use of technology and GenAI in combination for people. That's why we say put AI to work for people. Think about the tech stack out there today. Twelve hundred CEOs were surveyed by EY. The question was, will you invest in AI? Do you believe in GenAI? And 1,200 said yes. So there's a great re-prioritization in the budgeting cycles in companies today. Money is moving away from commodity and old tech to advanced cloud technologies and platforms and generative AI. In fact, I'm talking to many companies now that are pulling money from their R&D budget to put it into the GenAI line item so they can get this going. Think about this: 80 percent of the CEOs in various industries today say GenAI will disrupt [their] industry. Ninety-three percent of them have said it is a positive productivity driver for [their] company. So we're selling into a tailwind. This is not a headwind. And this is really big.

GenAI’s Growing Opportunity

You have to remember, we are a platform company. The definition of ServiceNow is a platform. And what I believe makes ServiceNow so intriguing as a company is that that platform spans the enterprise on an end-to-end basis. So the AI platform for business transformation is what the ServiceNow platform is. We are transforming business. CEOs have to clean up the mess. There's literally hundreds and hundreds of brands that have been invested in because tech was procured by every department for every department’s unique needs. And that has been going on for a good 25 years. Now you combine that with 50-plus years of big systems with brands that you easily recognize, and you have complete chaos. And that's why 85 percent of the digital transformation initiatives that go on in companies do not deliver a positive ROI. And that's why ServiceNow is coming to the rescue. Help is on the way. Because with ServiceNow, you get a single pane of glass that resides above the mess and enables CEOs and leaders of companies to have a single view of their consumers, of their employees, of their partners, and ultimately of the entire business value chain. And that's why, when we get into our loyal customers, we expand our base. And now we're growing our large deals at such a rapid clip because we're now talking business transformation, not just digital transformation, in a singular department.

I think this is really important, too. The C-level decision makers have had it with the bad experiences, because if the people don't use it, and they don't enjoy it, it doesn't help. In fact, that really hurts. Just think about this: The average employee in a company today ‘swivel chairs’ between 13 separate applications a day. What does that mean? That simply means that if we work across these personas and only deal with a very conservative view of how ServiceNow can improve the productivity of just the attendees of this event, not the world, we've done the math. It's a billion hours of productivity. A billion hours of productivity. So we are playing chess, not checkers. And we are ready to take the world on.

Taking The ServiceNow Brand With GenAI To The Next Level

We're very much a product-centric company. Building great products is the hallmark. You also have to provide a great service. And what you see with ServiceNow is the way we work in harmony across our company. That's functions, that's tethered to industries, and that's ultimately delivering a great service, which is our own value and impact plus that of our partners. And if I think about our partners, I tell you, it wasn't too long ago when they would come into the conference room in Santa Clara and tell me, ‘I have a great idea. I think we could build a $100 million plan with ServiceNow.’ I explained to them how many zeros they were missing. Now, every single [major] partner has a multi-billion-dollar business plan with ServiceNow, a multi-billion-dollar global strategy with ServiceNow. And they're executing on that, training people, getting people ready for the GenAI revolution, and actually helping us sell that today, service that today, and deliver that today.

Brands have to tell a great story. And ‘The World Works with ServiceNow’ is gigantic. And I'm proud to tell you that we just hired Colin Fleming from Salesforce. And he's our new CMO [chief marketing officer]. ... We also have brought on a great multi-year, brand ambassador gentleman by the name of Idris Elba. And Idris is a very interesting guy. He never forgot where he came from. He comes from Sierra Leone. And he's not just a brand ambassador on a multi-year level because he thinks it's a good idea to talk about our brand. He learned about our company. He learned the product. He understands what we do. And he wants to work with ServiceNow to build a smart city, in fact the smartest city in the world, in Sierra Leone. And we're his partner in doing that. So the authenticity of the partnership, the magnificence of the brand, and our great ambassador, I think, will tell a new story to the world.

And we're building a great team. I mean, if you look at our leadership team and our innovators – and I'm talking across all functions – they're the best. And we're just getting better. And every day, we kind of say to ourselves, ‘We're better than the company we were yesterday, and we're not yet the company we want to be.’ And that's why I think our culture, our people, our leadership team, and our partners will take us to places that you may not even believe that's how big it's going to be.

DESCO21c (The Defining Enterprise Software Company of the 21st Century)

It wasn't too long ago that we were not even a $5-billion company. This year, we're a $10-billion company, and soon will be a $15-billion company. And soon after that, we’ll be a $20-billion company. And me, personally, my vision is to be talking to you when this is a $30-billion-plus enterprise software market leader. So we're just getting started. And the consistency of the top line, the margin expansion, the free cash flow, loyal customers that love us, and loyal employees that don't want to work anywhere else, is what inspires me. Last year, we had a million applicants for jobs at ServiceNow. A million applicants. Getting in here is really hard. And when you do get in here, you come into a culture that's performance based. We love our people. We bring out the best in people, but we expect people to perform at an extraordinarily high level. We've grown organically. We didn’t buy any revenue. We built it all. Not that there's anything wrong with that if you do it properly. But I think it's pretty outstanding that we've gotten to this place, which no other company has ever done in enterprise software. And we're still forecasting more of the same without strategic M&A.

And we're creating value. The main value is for the customers. Because when the customers are happy, and they're doing transformational things with you, the shareholders are even happier. And that's the formula: Super happy and inspiring employees that know what they're doing, customers that understand the loyalty effect is the net present value of a happy customer, and we know that's the greatest asset we have. And for our shareholders, we're just gonna give it all every single day to make this the defining enterprise software company of the 21st century, and that is what we will do.

What It Will Take To “Unblock” AI

I really think the big thing here is awareness: When you can get mass awareness, and GenAI instead of just becoming a tech buzzword actually is in a business process, and you can demonstrate a workflow, and you can show people how this technology takes 70 percent of the soul-crushing work out of their life, and you can create a movement with the users. The senior executives are already looking for something to talk to the board about. Not about doing everything on GenAI, ‘let me show you what I got.’ It's the users that you have to touch. … These are not incremental sales of technology. These are business processes that fundamentally reengineer the way work is done. That's the big picture that we have to stay focused on here. I am unaware of an enterprise software company that can enable that like ServiceNow. None of them.

The Value Of Investing In ServiceNow

It's important that ServiceNow, our time to value, and our cost to implement, [when] compared to things that these customers are used to, looks like the best bargain in town. So I think it's really important that these projects are short cycles, with rapid time to innovation and rapid time to value, so they recognize this is no 20th Century tech company. This is a movement. This is a new tech company. This is a cloud company, born in the cloud and on the fly, not something that's just going for the old, ‘Let's bring in the busload of consultants.’ I just really want to make that point. So our cost to implement, compared to all the other ones out there that you know from the 20th Century, is [much lower].

Moving Down Market

Enterprise and commercial has been the major focus of ServiceNow. ... There’s lots of focus and execution in there. I think that there is a lightweight model waiting for us. We haven't even had to pull that switch yet. But there's a couple of partnerships that we're working with because we do realize that there's a great market down there for us. [We] look at that as upside and gravy, with a lower cost sales model, very turnkey, on the implementation side. We can focus on it probably by strategic industries. Or we do it geographically, and we just go for market share where we can. A lot of times I'll walk into companies of $1.5 billion that are making a mess of things – not because they don't like ServiceNow, but they don't even know we're there. So there's a lot of potential to go into those markets.