ServiceNow CEO McDermott: ‘We’re Running The Table In CRM’

‘Now with ServiceNow you can do the whole order management, fulfilling and servicing on one AI-driven platform instead of some bespoke AI agent talking with a disconnected silo somewhere in the world. When there’s probably 200 or 300 other silos in any given company, it doesn’t do anything but make things worse. So we’re straightening out the mess,’ ServiceNow CEO Bill McDermott tells CRN.

ServiceNow CEO Bill McDermott is as open and energetic a CEO as any when talking with the press or analysts. And that certainly held true during his latest conversation with CRN Wednesday, when the company reported its first fiscal quarter 2015 financials.

In that conversation, two themes became apparent.

First, ServiceNow expects to find growth instead of angst as a result of the Trump tariffs and moves by the Trump administration’s Department Of Government Efficiency, or DOGE, to shake up and disrupt the federal government as a way to reduce government spending.

[Related: ServiceNow CEO McDermott: 'Taking On The World's Biggest Challenges’ With AI, New Nvidia Pact, More]

“The positive engagement we have with government agencies is really a shared ambition to transform government and deliver best results and return money to the taxpayers,” McDermott said. “Think of it this way: Government agencies are still running 1959 COBOL systems, and they have many, many hundreds of instances of ERP or CRM or HCM [human capital management]. With ServiceNow, they can collapse all of that and move it to the AI operating system for the enterprise in ServiceNow. We have an unfair advantage based upon the architecture of our platform because you can get rid of hundreds and hundreds of platforms. And so the savings that we are seeing for the government is in the billions of dollars with a ‘B.’”

Second, the CRM business now has a huge bull’s-eye painted on its back at which ServiceNow is about to target.

CRM is a major focus of ServiceNow for 2025, McDermott said.

“We’re running the table in CRM because now you can configure, price and quote CRM with ServiceNow, and that has been a horror show,” he said. “You check your sources in any well-known CRM company, and there’s a couple out there. They have the worst configure-price-quote solutions ever. And now with ServiceNow you can do the whole order management, fulfilling and servicing on one AI-driven platform instead of some bespoke AI agent talking with a disconnected silo somewhere in the world.”

There’s a lot going on at ServiceNow and the quest for AI dominance. Here is more of CRN’s interview with McDermott.

How much impact has AI had on ServiceNow’s first fiscal quarter 2025?

We had another elite-level execution quarter for ServiceNow. Our AI acceleration delivered another amazing quarter where it actually quadrupled year over year. We had 39 deals with three or more Now Assist products in them. And what I see is really pretty simple. Sure, a lot of companies are hearing the agentic AI pitches. But what sets ServiceNow apart is simple. It’s our platform. We integrate across the entire tech stack—ERP, CRM, HCM, etc.—and we’re bringing all that data into a single model. And from there, we elevate into the workflow layer where you can take action on that data wherever it lives. And then we really move into the AI layer, where it’s not just automation, it’s true AI agents that are executing real tasks in parallel to drive outcomes.

I just got off the phone with a CEO who asked me, ‘What makes your platform different?’ And I put it like this: No one says I’m going to use my ERP to cut across all the systems in my enterprise and drive productivity. Nor do they do that for CRM or HCM. But they’re now doing that with ServiceNow, and that’s why we’ve become the operating system for the enterprise and the AI platform for business transformation, which I told you we would do last year in Las Vegas. So we beat on the top line, we beat on the bottom line and we raised our guidance. I think we’re one of one. I don’t think any other company is doing it.

What gives you the confidence to raise guidance?

The signals are amazing. Our pipeline is great. The [upcoming ServiceNow] Knowledge event is way up year over year in attendance. In this environment, our pipeline is big and getting bigger. Even our public sector business was up 30 percent year over year. And we’re later laser-focused on modernizing government and elevating how it serves the American people. In fact, agencies around the world are kind of following DOGE and following us on what we’re doing because we’re going to take out billions of dollars of costs and give the money back to the American taxpayer, along with better experience and obviously a lower cost to run government. So across the board, industries, the public sector, the geographies, [these] are all strong. EMEA had a great quarter. Asia-Pacific and South America as well. So we look at all the demand signals, and they’re there for us, and that’s why we upped the guidance.

What about the impact from U.S. government moves to rein in external contracts and bring more IT in-house when it comes to your guidance?

Well, I can only report one quarter at a time. And we grew 30 percent year over year. We had six net-new public sector logos, including one in the U.S. federal. We had 11 federal deals that were greater than $1 million, including two that were greater than $5 million. We report quarters one at a time, and we had an outstanding quarter. We’re working with all the agencies and DOGE on how we can take billions of dollars of cost out as this software industrial complex in government collapses onto ServiceNow.

The difference is we were built for this moment. What the ServiceNow platform does is takes cost out, improves productivity, improves the margin profile of a business or a government entity, regardless of the revenue scenario. And we also use AI to help companies grow and to invent new business models and invent better services for employees or better services for citizens. So I think it’s very clear we are becoming one of one, and we are the distinctive company in enterprise software, which I always knew we would be when I said we’d be the defining one.

Have any U.S. federal government organizations or departments pulled back in terms of contracts with ServiceNow?

We haven’t had anything. You have to remember that when an entire agency goes away, that could impact us, but we take all that into account in our guidance. … The thing that you have to take away is the positive engagement we have with government agencies is really a shared ambition to transform government and deliver the best results and return money to the taxpayers. Think of it this way: Government agencies are still running 1959 COBOL systems, and they have many, many hundreds of instances of ERP or CRM or HCM. With ServiceNow, they can collapse all of that and move it to the AI operating system for the enterprise in ServiceNow. We have an unfair advantage based upon the architecture of our platform because you can get rid of hundreds and hundreds of platforms. And so the savings that we are seeing for the government is in the billions of dollars with a ‘B.’

How about any impact from tariffs? We know ServiceNow is a software and services company, but that software has to run on hardware someplace. Have you seen any impact either on your company or your customers from the increased tariffs?

No, there’s plenty of hardware to run software on. What I see is an increasing demand for ServiceNow. Each industry is a little bit different. But if you think about an auto manufacturer, right now they’re focused on adapting the supply network in the face of tariffs. To build a single car, you’re working with 30,000 components. And if you don’t optimize your supply chain in real time and rethink your supplier network, you have to pass a $10,000 increase per vehicle to the consumer, and they may not pay that. So [manufacturers are] turning to ServiceNow because in real time we can rewire tier-two and tier-three suppliers and activate the certification of new vendors so they can deliver the lowest possible cost car at the highest quality to their consumer.

Each industry is a little bit different. Think about a global insurance company. I met with a CEO two years ago, and she was talking to me about transforming claims processing with AI. She said, ‘How about this, Bill? Why don't we use agentic AI to turn me into a data company where I can use agents to transform the claims process and also use digital agents to sign up new clients, and instead of human agents use agentic agents to grow my revenue? And let’s do that on the ServiceNow platform.’ Or the head of a major hospital network talked to me about what he wants to do with AI. Think about it this way: Human language is only 7 percent communicated in words. The other 93 percent is inference. So let’s just say you had a heart condition. You call up the hospital with an inference in the tonality of your voice that sounds quite urgent. Now, with our agentic AI, they grab your files immediately. They can see that it’s an emergency situation, and they take emergency measures to care for you because you’re in a unique classification in their system. A human can never figure that out as quickly. So every industry is going to change. It’s a $20 trillion GDP impact in five years, $4 trillion in OpEx, and we’re one of one. We're literally the finest enterprise-grade AI platform in the world.

What are some things ServiceNow plans in terms of further AI development through 2025?

It’s going to be huge. With our Yokohama release, we released thousands of agents. We’re going to do a lot more in our next release. You see what we’re doing with Workflow Data Fabric [to scale and provide efficiency and power workflows and AI agents with real-time, secure access to data]. Now we’re selling RaptorDB to major companies like Wells Fargo, but you’ll see RaptorDB generating major deals. Also, our Workflow Data Fabric is going to integrate with all the data sources of an enterprise, and you’re going to be able to do BI and analytics and real-time knowledge dashboarding across companies with AI, driving the whole process between the automation layer, the data layer and the integration layer in these thorny, complex legacy systems. So all that and more.

CRM is a major focus. We’re running the table in CRM because now you can configure, price and quote CRM with ServiceNow, and that has been a horror show. You check your sources in any well-known CRN company, and there’s a couple out there. They have the worst configure-price-quote solutions ever. And now with ServiceNow you can do the whole order management, fulfilling and servicing on one AI-driven platform instead of some bespoke AI agent talking with a disconnected silo somewhere in the world. When there’s probably 200 or 300 other silos in any given company, it doesn’t do anything but make things worse. So we’re straightening out the mess.

Workflow Data Fabric is a major, major focus. And the Now Assist agentic AI agents is a major, major focus on the platform. And we’ll do that across every industry in the global economy. And every quarter, you’re going to see a torrid pace of innovation hitting the market. We're making a lot of money, and we’re investing it back into R&D.

We ran this quarter as a ‘Rule of 68’ with free cash flow [growth] at 48 percent and sub [subscription] revenue [growth] above 20 percent. There’s no other company in the information technology industry running at the ‘Rules above 50’ that we are. So we keep reinvesting back into innovation. They say you’re world-class when you're operating at 40. We blew that a long, long time ago.

Next month, the annual ServiceNow Knowledge conference will be held in Las Vegas. Give us a teaser. What can people expect to learn from ServiceNow?

Well, I think I already covered a lot of it. You’re going to see the AI movement hit a super scale. We see it as an AI super cycle, and ServiceNow is transforming customer relationships through AI. That’ll be a big story. You’ll see the employee experience, where employees are going to change the game for themselves through AI. And you’re going to see the Workflow Data Fabric and the Data Fabric of ServiceNow hit an entirely new gear. Those are among the things that you’ll see. But remember, we’ve got so much to talk about. But I really want you to focus on CRM. I think you’re going to be blown away.