Bill McDermott’s time at the helm of ServiceNow hasn’t been an eventful one. A few months after he took over as CEO at the end of 2019, the coronavirus pandemic brought the global economy to a halt. And in late 2022, ChatGPT began the AI revolution that continues to transform the business world.
Throughout the turmoil, McDermott has steadily grown the business of ServiceNow, which provides online software for companies to manage human resources, IT and other internal functions. Annual revenue was $3.46 billion in 2019, the year he joined the company, and is on track to reach $13.3 billion in 2025 and exceed $15 billion this year.
Impressive? Not according to Wall Street, which punished the company’s stock. ServiceNow stock is down 39% since the beginning of the year and more than 55% from its 52-week high. ServiceNow on Monday released new financial projections that call for revenue to double to at least $30 billion by 2030. The stock price rose less than 1%.
This is because of the circuspocalypse, where AI will make Software-as-a-Service businesses like ServiceNow unnecessary for customers.
To McDermott, this is a false narrative that misunderstands the enterprise software market and ignores how AI is a tailwind, not a headwind, for ServiceNow’s business. “That’s nonsense,” he says of the Sarspocalypse concept.
McDermott, 64, shared his thoughts in an interview. luck ServiceNow made the call Wednesday from the company’s annual knowledge conference in Las Vegas, where it announced a variety of new products.
The disconnect between Wall Street and “main street customers” is frustrating, acknowledged Mr. McDermott, a native of Long Island, New York, with a perfect accent. Still, he insisted he would not be fazed by the stock market’s decline. “I’ve been through tougher challenges on my way to battle. That’s the story of my life, dude,” he said. “I’m not going anywhere. No matter who hits me, I can still come out on top.”
As evidence of his determination, he pointed to his purchase of $3 million worth of ServiceNow stock in February. More than 90% of ServiceNow employees have also purchased company stock.
“I made it very clear to the company that once this is unleashed, it will be unleashed and we will be a trillion-dollar company,” he said. “It’s just a question of when they’ll be released, not if they’ll be released.”
“The mystery can be solved”
ServiceNow announced a number of new AI-powered initiatives, products, and partnerships at a conference in Las Vegas this week. The new service, called Action Fabric, will enable customers to have AI agents interact with ServiceNow apps, creating a new usage-based monetization model for ServiceNow as it continues to expand beyond traditional seat-based licensing for the software business.
Thanks to some recent acquisitions, ServiceNow is expanding further into big markets like cybersecurity. For example, the $7.75 billion acquisition of cybersecurity company Armis was officially completed in April and will become a key part of ServiceNow’s AI monitoring and security offering. And after nine months of regulatory review, ServiceNow completed its $2.85 billion acquisition of agent AI startup Moveworks in December. “We’re where we need to be right now. We have everything we need,” McDermott said when asked if more M&A deals are on the horizon.
On the topic of the Saaspocalypse, McDermott said ServiceNow grew more than 20% annually during his tenure, while many of its peers in the Saas industry were beyond the high-growth era. “Before AI really took off, it was no longer a growth company,” said McDermott, who spent nine years as CEO or co-CEO at German enterprise software giant SAP before joining ServiceNow.
Nevertheless, McDermott emphasized that AI is not a threat to enterprise software companies. Because companies can only truly benefit from AI if the technology has access to the company’s data troves. And the gateway to that data goes through enterprise software companies. “These companies have left a footprint within the enterprise that is not going away,” he said.
Without the context of an individual company’s data, AI models are just “expensive advice,” McDermott said, echoing one of the recent talking points.
That’s not to say he isn’t bullish on AI model makers, particularly companies like OpenAI, Anthropic and SpaceXAI, all of which are thought to be preparing to go public.
“They’re going to go public, they’re going to do great, their investors are going to do great, they’re going to have a very bright future,” McDermott said.
He said it’s good for everyone because it brings transparency. “When you’re in the public markets, everything becomes completely clear: What are you good at? What are your revenue projections? And what are your profitability projections?”
“The mystery will be solved,” he said, adding that as investors gain a better understanding of AI companies, they will be able to make more informed decisions about the broader market, including companies like ServiceNow.
“I think that will help clear things up and make the market pretty rational,” McDermott said.
