ServiceNow to go mobile after strong Q3

Products beyond ITSM speed up, SkyGiraffe acquisition should make users 'appy

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ServiceNow has beaten estimates of revenue and earnings for its third quarter, and outlined a new mobile strategy.

The company on Wednesday reported its Q3 2017 results, recording revenue of US$498.2m and earnings of 38 cents a share. Those numbers are up 39 per cent and 65 per cent respectively, and beat estimates of $491.6m and 32 cents. Guidance for Q4 predicts the company will crack the $500m barrier, landing between $531m and $536m, and leaving annual revenue at $1.91bn. That'll be close to 40 per cent year on year growth.

ServiceNow came to prominence as an IT service management tool, but has of late diversified so it can sell beyond the IT department. CEO John Donahoe told investors the company's new lines are doing well, with employee services experience product leading “three of our top 20 new customer deals” and its employee services product is now used by 119 of the Global 2000. “Our customer service management product landed two million-dollar plus deals,” he added. The company made 22 deals of that value in the quarter, one of them the first time ServiceNow's security operations product cracked the $1m mark.

“Our flagship ITSM product had a very good quarter, with ITSM being include in 17 of our top 20 deals and our platform was included in 15 of those deals,” Donahoe said.

The CEO also talked up the company's forthcoming AI agents, which will debut in 2018's Kingston release. Donahoe said ServiceNow's been using the tech itself for some time and “Within two weeks, the intelligent agent was outperforming human accuracy on incident categorization and incident routing … roughly we estimated 8% of our customer support engineer time used to be incident routing, incident categorization. That’s now freed up to actually solve real problems for our customers.”

The company's plan to manage growth was the subject of a few analyst questions during the earnings call. Chief financial officer Michael Scarpelli mentioned plans to “continue to invest heavily in our product sales specialists.

Donahoe added that “we’ve been sitting down with several of our largest partners and doing what I would characterize as joint account plans.”

“It’s really the first time we’ve done this, where we sit down and we’re becoming an increasingly large, relevant, and, in many cases, the highest growth part of their service offering,” he said, naming Accenture and DXC as partners now doing joint planning.

Donahoe also used the call to announce the acquisition of SkyGiraffe, a platform for building mobile apps.

“This acquisition gives us a world class team to make mobile native to our platform in 2018,” Donahoe said, adding that “All of our package applications, including ITSM will be available in a native mobile format. And so ServiceNow customers and partners will be able to easily build mobile apps in days, not months with our tools and templates.”

Financial terms were not disclosed.

Markets reacted poorly to ServiceNow's results, knocking about five per cent of its share price as investors worried about billings. Donahoe and Scarpelli mentioned seasonal factors as the cause of lumpy numbers, but said the company is well-positioned to smooth things out.

Donahoe also said the company can handle complementary businesses like WorkDay considering overlapping products. WorkDay recently hinted it would build an employee portal, something ServiceNow already offers. The CEO said ServiceNow is actually a WorkDay user and will figure out how to work alongside rivals. ®


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