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Former SAP CEO McDermott to Lead ServiceNow Upon John Donahoe’s Departure

McDermott aspires to grow revenue, margin and ecosystem as ServiceNow CEO.

Jeffrey Schwartz

October 24, 2019

4 Min Read
Leadership
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ServiceNow CEO John Donahoe isn’t sticking around to fulfill his goal of reaching $10 billion in annual sales from last year’s $2.6 billion, but his successor Bill McDermott says the march will continue without disruption to customers, partners and shareholders.

Appearing together on last night’s third-quarter earnings call, reporting numbers that beat analysts’ expectations – 34% revenue growth – the focus was mostly on the unexpected succession, announced Tuesday, where Donahoe is leaving to become CEO of Nike. In what was apparently a quietly orchestrated move, McDermott said just two weeks ago that he was stepping down as CEO of SAP, only saying that discussion of his future “was for another day.”

It turns out that the CEO swap was well in progress, as McDermott indicated Wednesday that he has met with ServiceNow directors and key executives, and said that he has already made arrangements for the move.

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SAP’s Bill McDermott

“I have already bought houses, sold houses, planned the move for my family,” McDermott said on the call.

Donahoe said his reason for leaving ServiceNow had nothing to do with a change in belief of the company’s potential, rather that as a sports fan, he considered running Nike as a dream job.

“I believe deeply in ServiceNow and I believe deeply in ServiceNow’s opportunity,” Donahoe said. “I believe, as much today as any time I’ve been here, that we’re very well positioned to get to $10 billion and move on our way to becoming a great company.”

ServiceNow tapped Donahoe, the former CEO of eBay, to lead ServiceNow in 2017. During his tenure, ServiceNow’s growth surged. The company’s alternative SaaS-based approach to IT service management (ITSM) and expanding into an IT and business operations automation platform has become a hit with large enterprise customers in recent years and more recently with (MSPs). The company’s stock price has tripled.

Despite ServiceNow’s growth on Donahoe’s watch, McDermott is regarded as a more seasoned enterprise technology expert, which could help propel the company’s next wave of growth, according to observers.

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Pund-IT’s Charles King

“I don’t think Donahoe – whose experience was more in consumer goods – was a particularly good fit for ServiceNow. He’s likely to do better at Nike, said Pund-IT principal analyst Charles King. “In contrast, McDermott has deep experience successfully managing a truly global enterprise vendor organization and brand. While there may be some initial hiccups, he should be able to help ServiceNow step up its business and market position.”

While some ServiceNow partners may be familiar with McDermott, others are not, particularly those focused solely on infrastructure management. William Huber, CTO of services and solutions at CDI, is among those who don’t know McDermott but are aware of SAP’s channel growth during his tenure.

“While CDI does not have a formal partnership with SAP or any direct experience with Bill McDermott, it is clear that under his leadership, a strong channel partner ecosystem was a strategic part of SAP’s growth plans,” Huber said. “As a ServiceNow elite partner, it is our hope that McDermott invests in and expands ServiceNow’s channel programs in order to continue driving successful business outcomes for its customers.”

Earlier this year at its annual Knowledge conference, ServiceNow revealed a revamped partner program focused on increasing capacity, providing specialization, competency with its new “digital badging system,” and capability. Addressing the latter, ServiceNow created five new partner …

… tiers: global elite, elite, premier, specialist and registered.

CDI’s Huber welcomed that new program.

“We hope to see a commitment to provide visibility and access to the product management teams so that we can provide valuable customer feedback and insights from the field that will influence product road maps, and get early access to upcoming releases and enablement content so that we are able to implement and support new releases immediately,” Huber said, when asked what he’d like to see from McDermott.

On last night’s call, McDermott signaled that he’d like to grow ServiceNow’s total addressable market (TAM), where he sees potential for growing revenues and margins. ServiceNow targets enterprises and service providers with more than 5,000 seats. McDermott said he’d like to push into midsize organizations with fewer seats, which he said included growing the partner base.

“The team has done a great job here of expanding the ecosystem,” McDermott said. “But if you look at the ecosystem, and the relationships that I have in the ecosystem, there may be a value play here or there with some of the partners, not just the biggest ones, but also the midsize ones around the world.”

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About the Author(s)

Jeffrey Schwartz

Jeffrey Schwartz has covered the IT industry for nearly three decades, most recently as editor-in-chief of Redmond magazine and executive editor of Redmond Channel Partner. Prior to that, he held various editing and writing roles at CommunicationsWeek, InternetWeek and VARBusiness (now CRN) magazines, among other publications.

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