Bill McDermott Takes CEO Role At ServiceNow: Employee Experience Is Even Bigger Than You Think
This week I’m in Paris at the Unleash HR Tech conference and I was having dinner with a large room of HR executives, hosted by ServiceNow and Deloitte. The person next to me handed me his phone and I saw the news: Bill McDermott, the former CEO of SAP, just took over as CEO of ServiceNow, as John Donahoe takes on the CEO role at Nike.
John Donahoe was a stellar leader of this company and one can only imagine that the opportunity to lead Nike was too big to pass up. But the bigger story for me is the move by McDermott, who led SAP for more than ten years and presided over the company’s move to the cloud, doubling of its revenues, and $8 Billion acquisition of Qualtrics.
SAP, a $27 billion company (market cap of $162 billion) is one of the biggest, most enduring enterprise software companies ever created (SAP essentially invented the idea of integrated business applications). McDermott watched over the acquisition of SuccessFactors, Callidus, Concur, Sybase, and a variety of other companies and SAP has now become one of the biggest cloud computing companies in the world. ServiceNow, with revenues of close to $3 billion (with a 36% growth rate) is arguably the next big “ERP” in the market (ServiceNow’s market cap is now 20% higher than Workday’s).
So whatever you think about why McDermott left SAP, this tells us that ServiceNow sees enormous growth ahead.
And I have to agree.
I’ve been in the enterprise software market for more than 40 years, and every now and then a transformational company can upset the incumbent apple cart. Workday did this to SAP and Oracle (they’ve somewhat recovered but certainly have not reached Workday’s momentum). Salesforce did this to Oracle and Siebel, and to a some degree Google and Apple did this to Microsoft. (Microsoft has clearly woken up and is back to doing great things.)
ServiceNow, which began its life in a somewhat dull market for IT case management, knowledge management, and service automation, is now in a position to do this to everyone else. How? They’re changing the game: ServiceNow is an ERP platform for employees, not Finance and HR managers. In other words, it’s designed as a highly customizable swiss army knife designed to make all sorts of employee-facing experiences better (and connect to the back end systems).
In the market for HR software, every vendor is now pushing hard in this direction. A few weeks ago SAP/SuccessFactors announced its Human Experience Management interface, designed to give employees a chat-based intelligent interface to its systems. Last week Workday introduced its People Experience platform, which is an elegant new intelligent system designed to do the same. And frankly, this is the story about SAP’s acquisition of Qualtrics – attempting to create “experience systems” that sit in front of “transaction systems.”
Why this shift? It’s quite clear that the world has changed: employees (and customers) want their business life to be as simple as their personal life. We can use Uber, DoorDash, and Yelp to move, eat, and comment at home. At work we have a messy conglomeration of portals, applications, and hard to use systems that frankly, make work hard. ServiceNow just discovered that 52% of employees believe “the company does not give me the right tools to do my job.”
So what this means is that the new “ERP” is focused on making systems that employees like to use. Not an easy task, but clearly a new direction. ServiceNow is well ahead of others in this space because they’ve been simplifying and automating IT management for years (where is my password again? why does this computer fail to boot?). Now they’ve extended the product into HR and other service areas.
Microsoft is moving in this direction with Teams, and products like Slack, Workplace by Facebook, and many others are now fighting for the eyeballs of billions of employees. (ADP is not taking this lying down either.)
And this is a brutal war. The vendors that win the “employee eyeball” market become the “must-have” systems for corporate IT and HR systems buyers. Nobody would ever dream of preventing employees from using Uber or Lyft (IBM tried and there was almost an immediate revolt), so if one of these vendors builds the “employee system of choice,” they will grow like crazy.
This is a big new game, and the stakes are huge. Companies spend hundreds of billions of dollars on employee-facing systems and there is no “single ERP system” that does everything companies need. In HR alone the average large company has 11 systems of record, and thanks to the cloud that number is going up (it’s easier than ever to plug in a new “app” to your corporate infrastructure).
ServiceNow, which positions itself as the “service delivery platform,” is sitting in the middle of this market. And as I talk with more and more companies buying new cloud-based systems, I hear more and more that “we need a way to deliver a more integrated employee experience,” regardless of which ERP we have. ServiceNow, which connects to heterogeneous systems by design, is a perfect fit.
This game is definitely not over, and ServiceNow has lots of competition to deal with. But McDermott, who clearly understands how to compete in markets like this (and obviously has lots of friends at SAP), could be an amazing leader for the company in its next phase of growth. And we, as consumers of all this stuff, can hope this works out and the entire world of work gets easier, better, and more fun for everyone.