Zhitong Finance APP learned that, recently, Salesforce (CRM.US) acquired Slack (WORK.US) for US$27.7 billion, with the aim of building it into a powerful company and stealing the attention of the market. However, ServiceNow (NOW.US), the world's second largest Saas company, is silently advancing its own development plan and gradually winning chips in the field of cloud computing. The stock has risen by more than 80% this year. BBAE Securities said that this is benefiting from the general trend of corporate digital transformation and the promotion of the digitalization of corporate offices by health incidents. Predecessor of
ServiceNow: Glidesoft
was formerly known as Glidesoft before ServiceNow was listed in 2012. According to statistics from BBAE Bibei Securities, ServiceNow has been continuously developed with the help of many CEOs: In the early development stage of the company, the CEO was Frank Slootman, who consolidated ServiceNow’s position as an ITSM supplier and increased the company’s business from annual revenue. Millions of dollars grew to an annual revenue of 1.5 billion US dollars; then, ServiceNow hired John Donahoe in the consumer field to take over as the company's CEO. During his tenure, the CEO created nearly 4 billion US dollars in annual revenue for the company.
Now, Bill McDermott, who has worked for SAP SE (SAP.US) for nearly 20 years, takes over as the company's CEO and provides more rich experience for the company to achieve corporate transformation.
ServiceNow's development strategy: strategic cooperation and small acquisitions
ServiceNow has adopted cooperation and targeted acquisitions with major companies on its way to market dominance.
In July this year, Microsoft (MSFT.US) expanded its partnership with ServiceNow; shortly thereafter, Accenture (ACN.US) and IBM partnered with ServiceNow to create new business units to promote the development of all aspects of the digital revolution.
This has led some analysts to predict that Salesforce may establish partnerships with SAP and Oracle in the future.
At the same time, ServiceNow also supplements and develops its technology through acquisitions such as artificial intelligence startups Passage AI and Loom Systems.
In addition, in March of this year, ServiceNow also announced the launch of a new computing platform Orlando, which adds artificial intelligence and machine learning functions, and helps companies such as MGM.US perform virtual agents to automatically handle repeated requests. David Schubmehl, research director of IDC cognitive/artificial intelligence systems and content analysis, said: “The use of virtual agents will provide employees with a 24/7 support experience without human resources.”
former Cisco (CSCO.US) CEO John Chambers said: “McDermott has realized the importance of acquiring related AI companies. This is obviously a major emerging trend in the field of M&A.” Sunil Madan, Chief Information Officer of
Zoom (ZM.US), said: “A client emphasizes speed and When simplicity is most important, ServiceNow provides us with services that can unite the company’s front-line, middle-level, and back-office teams to increase productivity. The innovation of the Now platform allows us to predict and remediate outages to maintain business continuity."
and each A series of cooperation and mergers and acquisitions activities of large companies have brought ServiceNow a certain competitive advantage in the field of cloud software, but with corresponding returns, this will also bring certain risks to the company. In this regard, BBAE Securities said that if ServiceNow continues to increase in mergers and acquisitions in the future, but the acquired company cannot achieve good performance, this may have an impact on the company's future value.
ServiceNow: Quietly becoming a superpower in the field of cloud software
McDermott now gradually leads ServiceNow into a new stage of development, and aims to become one of the fastest-growing major cloud computing providers: the company's market value has doubled to more than 100 billion US dollars ,And also joined the S&P 500 index.
McDermott said: “We are moving towards becoming a decisive enterprise software company in the 21st century. If we pay close attention to our current position in the market, we can find that we are the only company that has a market capitalization without large-scale mergers and acquisitions. A cloud software company with a value of $100 billion.”
can see that in the process of ServiceNow’s unstoppable rise, this company is leading a "workflow revolution" by continuously improving enterprise productivity with its automation software.
In addition, ServiceNow has also adopted a different development model than Salesforce. The company focuses on building partnerships and small acquisitions, rather than the large-scale acquisitions that Salesforce did with Slack and the previous Tableau Software Inc. ($15.3 billion) and MuleSoft Inc. ($6.5 billion).
Although ServiceNow is on the verge of becoming a big company in the true sense, it is undeniable that the company still has a way to go: According to FactSet statistics, the current market value of the company is roughly the same as that of IBM (IBM.US) , But its expected revenue for fiscal year 2020 is $4.49 billion, which is only one-fifth of Salesforce, one-sixth of SAP, one-ninth of Oracle (ORCL.US), and one-sixteenth of IBM.
But as major companies and government agencies invest billions of dollars in digital infrastructure, ServiceNow is continuing to attack in this direction. According to IDC data, as of now, more than US$3 trillion has been invested in digital transformation plans. However, only 26% of the investment has achieved a considerable return on investment. In this regard, McDermott said: “Investment in the market has promoted the'workflow revolution', and ServiceNow will play an important role that was missing in the past to integrate systems, silos, departments and processes, so that all individuals can integrate simple, In an easy-to-use cross-enterprise workflow."
Morgan Stanley analyst Keith Weiss also upgraded ServiceNow’s rating from "Neutral" to "Buy" and raised the target price from US$559 to US$652, and said that During the public health incident, the surge in demand for "workflow automation" technology will help ServiceNow continue to maintain revenue growth of more than 25%.
Similarly, Wendy Johansson, global vice president of Publicis Sapient, a digital business transformation company, commented on this: “ServiceNow uses “inside-out” technology to solve corporate problems. It is a way to automate operations to reduce costs and improve work processes. In addition, in the third-quarter financial report released on October 28, the company disclosed that the annual contract value of its 1012 customers exceeded US$1 million, a year-on-year increase of 25 %. Including 41 such transactions in the third quarter, new customers include the U.S. Senate and Mount Sinai Hospital in New York City, and increased its guidance for the full-year subscription revenue range to US$4.257 billion to US$4.262 billion, calculated at a fixed exchange rate. A year-on-year increase of 31%.
In this regard, BBAE Securities said that although ServiceNow’s third-quarter financial report was better than expected, it is still doubtful whether the company can guarantee sustained rapid growth in the future to support such a high valuation. Moreover, as the company expands in new areas, the company may encounter more fierce competition. For example, entering the field of CEM (Customer Experience Management) means that direct competition with Salesforce will intensify. If it cannot successfully obtain the market The share, the company may be subject to certain fluctuations.
But if ServiceNow’s market forecasts prove to be accurate, then the company may have the opportunity to flex its muscles in front of Salesforce, the leader in the cloud software industry, and achieve the goal of $10 billion in annual sales.
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