Servicing IT: ServiceNow CEO Fred Luddy (Part 6)

SM: Your company has been disruptive to the marketplace, which has forced your competitors to change their entire business model to address your success.

FL: Exactly. It’s similar to when Southwest came on the scene and dropped a whole new way of doing business for airlines into the market. We have a very different model. We’ve been very good for the marketplace in general, and we’ve helped our customers lower a lot of cost. We tell our prospects that if they tell our competitors that they are talking to us, they will get it at discount, so we’ve already saved them money.

SM: How big is your total available market? What is your assessment of the service desk market?

FL: The service desk market is $1.2 billion to $2 billion a year. However, we have a much broader vision. Based on our customer feedback, we believe that there is a need for enterprise resource planning (ERP) for IT. If you look at most large IT organizations, they will have 40 to 50 different processes to manage their operational areas, their application development area, their application portfolio, and demand management. We believe that should all be offered under a single portfolio. We can offer all of that, not just the service desk.

Application portfolio management, performance management, capacity planning, budgeting, and financial aspect cost management can all be done in a single system of records. Upper management in the IT organization as well as the people turning the wrenches at the lower levels should all have an idea of what should be done, when it should be done, who it should be done by, who approved it to be done, how much it will cost, and what risks there are associated with doing it. Even though we are in the service desk market, which is a $1.2 billion to $2 billion marketplace, we really believe that our approachable marketplace is probably a lot closer to $4 billion to $6 billion a year.

SM: Your strategy is to move into that $4 billion to $6 billion marketplace with a SaaS model?

FL: Yes. We are forthright in that we use our customers as our development partners. We ask them where their current pain points are and what we can do to help them. We have a project with Staples Corporation. There is a woman there who is phenomenal at application portfolio management, and she has phenomenal knowledge of how that business is supposed to be run. She is in fact telling us how we should be building out some of our applications so that they reach a broader audience inside the IT organization.

SM: What does the rest of the competitive landscape look like? Are there smaller players who perhaps are addressing some of these areas inside the IT portfolio? Are there potential acquisitions you could make to assist you in opening up this new market area?

FL: One thing that makes our company very different is that we have no plans whatsoever to acquire other technology. We believe in organically built software, and we are going to build it ourselves. That is the same approach SAP, PeopleSoft, and Oracle all initially took. We believe that these systems all have to work together which will give us a distinct, almost unfair, competitive advantage against others in those market segments.

This segment is part 6 in the series : Servicing IT: ServiceNow CEO Fred Luddy
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