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ServiceNow boss embarks on corporate trolling to get rise out of SAP
Workflow biz ignores digital naysayers, avoids wider malaise in Q3 software spending
ServiceNow CEO Bill McDermott used part of his conference call with analysts last night to troll his rival and former employer SAP but only after he'd walked listeners through the latest events in enterprise wares.
Q3 proved a welcome boost to McDermott and ServiceNow. As customer spending in parts of the tech industry slows, the workflow software biz has seen its valuation climb on the back of a 21 percent year‑over‑year increase in revenues, which hit $1.8 billion in Q3 2022.
Total gross profit reached $1.43 billion, up 78 percent on the year-ago quarter, while net cash provided by operating activities was $265 million, representing a 15 percent increase on Q3 2021.
ServiceNow saw its stock increase around 12 percent during post-market trading yesterday after earnings per share came in ahead of analysts' expectations.
McDermott told Wall Street types that while there were some "macro crosswinds" – presumably referring to imminent recessions in major developed economies – the company enjoyed strong "secular tailwinds."
"Digital technology is a deflationary force," said the exec famed for his fluency in corporate verbiage. "The enterprise digital transformation market is validated. The investment thesis is stronger than ever. Hybrid multi-cloud deployments, adoption of a modern data infrastructure stack, cybersecurity and risk management, AI and data analytics, remote work and collaboration, these trends are not only durable, their relevance is expanding."
The results contrast with Salesforce and SAP – rivals in the enterprise software market – with the former saying it saw sales cycles stretched and the latter missing analyst expectations with its mixed results overshadowed by difficulties of pulling out of Russia.
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- Salesforce set to hire thousands in India after hitting brakes on US recruitment
- Enterprise software deals slower to close as macroeconomics hit IT departments
In July, ServiceNow saw its valuation dip after cutting its sales outlook for the year. Speaking to a Citi Group analyst at the time, CFO Gina Mastantuono echoed concerns of fellow large software vendors Salesforce and Workday who both presented evidence of a deal slowdown in their recent financial results.
"We are assuming that the elongated deal cycles or the increased scrutiny on deals and approval processes will continue through the remainder of the year," she told investors, adding that the company had already taken the trend into account in its revenue guidance.
However, speaking on an analyst call this week, Mastantuono claimed that although ServiceNow was "not immune to the macro environment," it was "staying closer to our customers than ever before."
"There's more outlook on deals that are getting closed... people are looking at deals closer, but we are closing them," she said.
McDermott took the Q3 results as an opportunity for a bit of corporate trolling. He launched a new initiative dubbed RiseUp with ServiceNow, with plans to cross the threshold of 1 million ServiceNow-certified professionals by 2024.
Any similarity to RISE with SAP, a program to lift customers to the cloud, must be purely coincidental even if McDermott was once CEO of the German software giant. ®