Düsseldorf First Frankfurt, then Munich: Bill McDermott walks on old paths. The head of the cloud specialist Service Now, who has been at the helm of SAP for almost ten years, is on the road again after the corona pandemic, including in Germany. It’s about meeting customers, of course. “The bosses are queuing up,” he says in an interview with Handelsblatt.
Some customers are also likely to experience a déjà vu. Because the topics McDermott is talking about are also reminiscent of earlier times: the 60-year-old American is enthusiastically praising products that are supposed to help with digital transformation. “Service Now has taken a bold step to become the platform for digital businesses,” says McDermott.
The US cloud service provider is significantly smaller than the German software manufacturer, which sold around 27.8 billion euros last year. But the manager has ambitious plans: he wants to triple revenues from the last $ 5.9 billion to more than $ 15 billion in 2026 – this corresponds to an average growth rate of around 20 percent.
The strategy envisages expanding sales internationally on the one hand and developing new products on the other. The American, for example, raves about the opportunities in the manufacturing industry. Recently, there has also been a program designed to analyze SAP systems and make them more efficient – a business that the Dax Group itself would like to do. In short: McDermott is poaching in SAP’s territory.
If the plan succeeds, the manager will be richly rewarded for it: last year he received a remuneration of $ 165 million. Of these, 139 million consisted of stock options that are subject to various conditions. In the list of the highest paid CEOs in the USA, McDermott is thus in third place.
A control center for IT
Service Now has become well-known with technology for IT departments: a cloud platform should make it easier to process and automate typical requests from employees – whether in the procurement of hardware or everyday problems with technology. According to market researcher Gartner, the company is a leader in this discipline, the “IT service management”.
The platform uses interfaces to access systems from providers such as SAP and Salesforce, Microsoft and Oracle. This, according to the central promise, should enable the design of overarching work processes with a uniform user interface.
For many companies, this is an enormous simplification of work. They use numerous different programs, some of which are decades old, at the same time new ones are constantly being added due to digitization. Integration across the boundaries of systems and departments is considered tedious and expensive.
The Service Now boss wants to transfer the principle to numerous other areas. The Group develops solutions for human resources, legal department or customer service on its cloud platform. He has also adapted the technology for a number of industries, from public administration to manufacturing. Customers include Bayer, BMW and Siemens.
McDermott’s vision for Service Now is as follows: “All companies have come to the conclusion – at least I hope so – that the IT strategy is the business strategy.“ After all, the pressure on managers to change the business is as high as ever, and that with limited time. The platform for this digital transformation is to offer Service Now. The Group estimates the market potential at $ 200 billion.
The American, never shy about big words, compares the situation with the founding of SAP 50 years ago, when the group invented standard business software and thus revolutionized accounting: it was not only the “greatest moment in the world of digital business”, but also for him personally “the greatest moment of my life,” says McDermott.
Globalization in the style of SAP
The experience at SAP, which he led until October 2019, suits the manager: at the software manufacturer with its international presence, he has learned on the one hand the globalization of business, on the other hand the adaptation of software to individual industries.
And he heeds another lesson: such an expansion requires software manufacturers and IT service providers who expand and sell the programs. That is why the management is currently expanding this network, among the partners are Microsoft and Accenture.
McDermott repeatedly emphasizes that one does not compete with other software manufacturers. William McKeon-White, an analyst at Forrester, sees it differently: platforms such as Service Now, Atlassian or Micro Focus are “well on their way to competing with other software manufacturers in core functions” – for example in sales and marketing or digital collaboration. Many platforms are concerned with occupying the “control center” for digitization.
This is what SAP is feeling: Service Now has developed a product with which customers can optimize their core business systems. The data is provided by the German start-up Celonis, in which Service Now has invested 100 million dollars as part of a partnership, according to McDermott.
However, SAP also uses such optimizations as a central argument for the “Rise with SAP” program, with which customers are introducing the new S/ 4 Hana product generation as well as several other cloud services. The Dax Group also has products in its portfolio in areas such as process automation.
“A little bit of Service Now is moving in the direction of SAP, a little bit of SAP is moving in the direction of Service Now,” observes analyst McKeon-White. The déjà vu should not pass by so quickly.
