Dusseldorf First Frankfurt, then Munich: Bill McDermott is following old paths. The boss of the cloud specialist Service Now, who headed SAP for almost ten years, is back on the road after the corona pandemic, also in Germany. It’s about meeting clients, of course. “The bosses are queuing up,” he says in an interview with the Handelsblatt.
Some customers are also likely to experience déjà vu. Because the topics that McDermott talks about are also reminiscent of earlier times: the 60-year-old American, as usual, enthusiastically praises products that are intended to help with digital transformation. “Service Now has taken a bold step to become the go-to digital business platform,” says McDermott.
The US cloud service provider is significantly smaller than the German software manufacturer, which had sales of 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 – which corresponds to an average growth rate of around 20 percent.
The strategy envisages expanding international sales on the one hand and developing new products on the other. For example, the American enthuses about the opportunities in the manufacturing industry. Recently there is also a program that is supposed 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.
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If the plan succeeds, the manager will be lavishly rewarded for it: last year he received compensation of 165 million dollars. 139 million of that consisted of stock options that are linked to various conditions. McDermott is the third highest-paid CEO in the United States.
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 inquiries from employees – whether for the procurement of hardware or everyday problems with the technology. According to market researcher Gartner, the company is a leader in this discipline, “IT service management”.
The platform accesses systems from providers such as SAP and Salesforce, Microsoft and Oracle via interfaces. According to the central promise, this should enable the design of comprehensive work processes with a uniform user interface.
For many companies, this makes work much easier. They use numerous different programs, some of which are decades old, while new ones are constantly being added as a result of digitization. Integration across the boundaries of systems and departments is considered to be tedious and expensive.
The Service Now boss wants to transfer the principle to numerous other areas. The group develops solutions for human resources, the legal department and customer service on its cloud platform. He has also adapted the technology for a number of industries, from government to manufacturing. Customers include Bayer, BMW and Siemens.
McDermott puts the vision for Service Now as follows: “All companies have come to the conclusion – at least I hope so – that the IT strategy is the business strategy.” The pressure on managers to change the business is higher than ever, and that in a short time. Service Now is to provide the platform for this digital transformation. The group estimates the market potential at 200 billion dollars.
The American, never at a loss for 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’s not just about the “biggest moment in the world of digital business”. , but also for him personally “about the greatest moment of my life,” says McDermott.
SAP-style globalization
The experience at SAP, which he managed until October 2019, suits the manager: At the software manufacturer with its international presence, he learned on the one hand globalization of the business and on the other hand the adaptation of software to individual industries.
And he takes another lesson to heart: 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, with partners including Microsoft and Accenture.
McDermott repeatedly emphasizes that one does not compete with other software manufacturers. William McKeon-White, analyst at Forrester, sees things differently: Platforms like Service Now, Atlassian or Micro Focus are “well on the 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.
SAP is feeling the effects: Service Now has developed a product that customers can use to 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 and several other cloud services. The Dax group also has products in its portfolio in areas such as the automation of processes.
“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 shouldn’t be over anytime soon.
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