ServiceNow looks to move IT beyond helpdesk to managing service relationships
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1 ServiceNow looks to move IT beyond helpdesk to managing service relationships Analyst: Dennis Callaghan 31 May, 2013 At its recent Knowledge13 customer conference, ServiceNow laid out its vision for becoming the cloud platform customers can run their IT operations on, extend service request applications to business departments, and generally increase IT's value to the business. Meanwhile, the company keeps adding customers by the hundreds and existing customers keep expanding their use of its platform, which is becoming more and more open to third-party ISVs. The future looks bright for ServiceNow, as long as it can effectively manage its own rapidly changing business. The 451 Take ServiceNow's vision as an IT system of record, one that can be easily extended to line-of-business uses, is starting to take shape as more ServiceNow customers expand their use of its platform and build their own applications on it. Meanwhile, the company has started to certify integrations of third-party ISVs' offerings for the first time. Eventually, the platform will be open enough for those ISVs to build their own applications on it. This remains a fast-moving player not content to rest on its laurels. With all those moving parts comes the possibility for missteps and growing pains. Plenty of competitors will be looking to pounce on any mistakes ServiceNow makes. Context The meteoric rise of ServiceNow took the company from its founding in 2003 and launch in 2004 to Copyright The 451 Group 1
2 nine-figure annual revenue and a successful IPO in Its success was largely driven by providing SaaS to run IT helpdesks, poaching customers and market share from enterprise IT service management (ITSM) incumbents like BMC Software, HP and CA Technologies and forcing those licensed software companies to adopt the SaaS model themselves. With a $5bn market cap, $282m in trailing 12-month revenue, more than 80% quarterly growth, and a host of new competitors and imitators, ServiceNow has started its second act, trying to move beyond providing incident management through hosted helpdesk software to being a broad IT management platform, an IT system of record. Customers not only build their own custom workflow applications on this platform but also use it as the basis for defining and managing service relationships between business and IT. The vision includes more automation, more self-service, and more of an opportunity for IT to provide a real value-add rather than just triaging incidents and problems for business users. ServiceNow has 1,269 employees. Its recent Knowledge13 conference drew more than 3,800 attendees, up from 1,840 just a year ago. Products At Knowledge13, ServiceNow showed off its Calgary release. This update of the company's cloud-based application service included the App Creator tool for creating custom applications on the ServiceNow platform, a cloud provisioning application, an updated Apple ipad interface, and support for CMDB data certification. The most significant of the new features to us was App Creator. While ServiceNow has given customers the ability to create their own JavaScript-based applications on the platform for a while now, App Creator officially productizes this capability. It gives customers a more simplified point-and-click interface for building mostly forms-based workflow applications for handling requests, both for IT and line-of-business uses, such as facilities or HR. The tool is targeted at nontechnical users. App Creator is likely the beginning of a broader opening of the ServiceNow platform. Future releases are expected to allow customers to share applications with each other, and then eventually allow third-party ISVs to build applications on the ServiceNow platform. The platform is priced at $25 per user per month. Even before the release of App Creator, about 58% of ServiceNow customers had built their own applications on the platform. ServiceNow Cloud Provisioning sits on top of the company's orchestration tool. It allows ServiceNow users to provision, decommission and manage cloud resources via the ServiceNow Service Copyright The 451 Group 2
3 Catalog in Amazon EC2 and VMware-based private cloud environments. ServiceNow now boasts a new Apple ipad interface, in HTML5, for both end users and IT personnel. Future releases of ServiceNow will focus on enhancing the iphone and Android smartphone interfaces that exist today. An early demo of that technology at Knowledge13 drew rave reviews from attendees. The new CMDB data certification capability automates the process of checking IT configuration data for accuracy, currency and relevancy. It can schedule people and groups to validate data models, attributes and configuration item relationships on a regular basis. Customers ServiceNow boasts 1,640 customers. It claims to be adding an average of 168 new customers every quarter. The company claims that even if it didn't add a single customer, it would still grow 30-40% a year just from existing customers expanding their investment on the platform. Incident management remains the most widely deployed application, with 92% of customers using it. About 65% of customers use change management, with 50% using service request management and 30-35% using problem management. Roughly 85% of customers use ServiceNow's CMDB. About 35% of customers use ServiceNow's discovery tool, 25% use project portfolio management and just 10% use ServiceNow for software development lifecycle. The typical ServiceNow customer only uses about 30% of what ServiceNow offers, hence the opportunity for growth for existing customers. The company sells directly to enterprise customers. It relies on partners to reach the SMB market, though doesn't sell to any customer with less than a $42,000 annual expenditure on its platform. GE remains ServiceNow's largest customer. Other customers featured at the Knowledge13 conference included Coca-Cola, AIG, the US Army, NetJets, Netflix, Nike and the New York Stock Exchange. Partners Channel partners like Cloud Sherpas, Fruition Partners, Cognizant, Dimension Data, Maryville Technologies, CompuCom, Accenture and KPMG remain a key part of ServiceNow's ecosystem, both in supporting ServiceNow customers, especially with implementation services, and in helping the company reach the SMB market. Copyright The 451 Group 3
4 ServiceNow recently launched its Certified Integration partner program for third-party ISVs with complementary offerings. Apptio (technology business management), Matrix42 (IT asset management) and Okta (identity management) are the first three vendors to be certified on the Calgary release, with several more likely in the pipeline as 19 companies were in the beta program for Certified Integration partners. Competition ServiceNow's key competitors remain BMC Software and HP. ServiceNow originally positioned itself to take away maintenance renewals from these two ITSM providers. It claims more replacements of BMC Remedy at the moment. Both of these firms have moved their offerings to the cloud in response to the ServiceNow threat, with BMC currently offering two cloud ITSM services Remedy OnDemand and RemedyForce on salesforce.com's Force.com platform. CA and IBM remain in the enterprise ITSM space, though neither is as prevalent in the market as BMC and HP. CA's Nimsoft Service Desk has emerged as that company's go-to offering for cloud ITSM. New entrants like Moogsoft and ITinvolve are looking to outpace ServiceNow with event correlation/analytics and social IT capabilities, respectively, though both have a ways to go to become truly disruptive in the ITSM space. BMC (via its Numara Software acquisition), FrontRange and ManageEngine are the stalwarts in the SMB ITSM sector, with SysAid Technologies, SAManage, Cherwell Software, Sunview Software, Axios Systems, LiveTime Software, EasyVista and Minerva Data Services all battling for positioning. ServiceNow continues to sell to this market through MSPs. Service providers with their own ITSM platforms, such as IPsoft, are also players for organizations that decide to outsource their entire helpdesk and other IT operations, rather than just subscribe to cloud-based software. IPsoft likely competes more directly against ServiceNow's own service-provider partners. SWOT Analysis Strengths Weaknesses In less than 10 years, ServiceNow has been a runaway success and continues to grow rapidly and gain market share. The company created and continues to dominate cloud ITSM. Opportunities Threats With its focus on growth, ServiceNow remains unprofitable. The company has had growing pains before, especially around performance, and will need to guard against further issues, especially around customer support and feedback, as it gets larger and larger. Some parts of ServiceNow's platform remain immature, such as reporting and analytics. Copyright The 451 Group 4
5 Existing customers remain interested in expanding their use of ServiceNow's platform. The company continues to target replacements of other enterprise ITSM offerings. Competition in this space remains strong, and ServiceNow will face a lot of worthy SaaS-based opposition as it goes downmarket. BMC and HP continue to provide stiffer opposition, both with their own cloud offerings and enterprise license agreements that make it unattractive for customers to leave their ITSM platforms when they have other large investments in those companies' IT management offerings. Copyright The 451 Group 5
6 Reproduced by permission of The 451 Group; This report was originally published within 451 Research s Market Insight Service. For additional information on 451 Research or to apply for trial access, go to: Copyright The 451 Group 6
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