Yahoo Finance anchor and editor-at-large Brian Sozzi spoke with ServiceNow CEO Bill McDermott on selling software stocks, the need for software during a pandemic and how CEOs can maintain the morale of employee.
Video transcript
BRIAN SOZZI: All right, joining Yahoo Finance today is ServiceNow CEO, Bill McDermott. Lots to do in the quarter here. This is well received by the markets. But before we go there, I want to tap into your industry experience.
I have been tracking your career since you were in SAP. Now, of course, ServiceNow for, for a good bit. You see cycles of higher interest rates. What have you seen in the past? You know, I think we need to dispel this myth a little bit that software and tech companies can’t do well when interest rates go up.
BILL MCDERMOTT: An environment of rising interest rates, its only impact is on companies needing to access credit markets to stimulate their growth ambitions. But for companies like ServiceNow organic growth stories that have a massive monetary position and continue to grow, that don’t have to access credit markets for their growth, are just in the perfect position to create value. of the shareholder. I really think of it as a safe harbor.
I mean, if you’re growing really fast, you’re spinning in free cash flow, and you don’t have to access debt, you’re just in a good position. So that’s where it’s at. Only companies that really need that credit will, to some extent, be affected. But it has greatly overwhelmed the media right now because it is associated with tech in general.
BRIAN SOZZI: I can’t believe it, Bill. This was the first week where I actually had some folks remark to me, hmm, maybe because the Fed raises rates, we might see a recession. I don’t see that, that’s not in your numbers whatsoever. What do you hear from customers to start the first quarter?
BILL MCDERMOTT: Customers are committed to digitizing their businesses. And you really have to look at it from their perspective, right? They are in an inflationary period, depending on their industry, it will affect different industries in different ways. At your point, they are in a, quote, unquote, “rising interest rate environment.” Its impact on some industries is different than others.
There are supply chain dislocations in the global economy, and all of that is true. But CEOs sit back and say, I need to create a great experience for my employees. I was in the middle of a talent war. I need to keep my best people happy.
I need to attract new people, ride with them, train them, accelerate them, and then manage their experience with my company in a truly flawless and digital way. And that’s the unique feature we bring, a consumer grade user experience for employees.
Another thing they say is, you see, my customer doesn’t approach me like they used to. I need to go to my customer. So if I’m serving my customer, and I’m looking to AI to help me, and I’m using things, like virtual agents, to eliminate customer relationship conflict, or I’m just selling my products now a direct-to-consumer basis. Companies need to digitize to serve the customer, and meet the customer where the customer is, and give them a good experience.
And then the big, big thing is, this 500 million new applications that need to be developed for the business enterprise over the next two years. And that’s more application development that’s going to happen– that’s happened over the last 40 years. So what does this mean?
That means there is a citizen developer revolution going on in business today. And leaders need to empower their people to develop new innovation in their business model. And they turn to platforms like ServiceNow to do that, to digitally transform and enable that.
And finally, it’s clear that technology strategy, Brian, has become business strategy. And that’s why ServiceNow, which has become the market leader in IT services, is now expanding the employee experience, customer experience, and creator workflow revolution on a low -code platform. It just really shows up as a total sensation. And that’s why we’re performing digitally because our customers need us now more than ever. That is why our goal is to make the world a better place for everyone.
BRIAN SOZZI: Did I get it right? On the call, you said, did you really– or did your CFO say, are the charges potentially poised to accelerate in terms of growth in the first quarter?
BILL MCDERMOTT: That’s right. We guide two ways. One is, we provide guidance in the first quarter and then we provide a full year guidance. And we accelerated growth on the guide in the first quarter. And we’ve provided, as you know, a very good forecast for the entire year 2022, essentially keeping 2021 rates consistent with what is now a larger company.
So it’s pretty interesting if you think of it this way. Five years ago, our full year revenue was equal to what we did in a quarter in 2021 in the fourth quarter. So this is an exciting time here at ServiceNow. And I just sincerely express my gratitude to our customers and our great employees and partners for being a part of this movement.
BRIAN SOZZI: ServiceNow CEO, Bill McDermott. Always happy to see you. Thanks for taking some time on a very busy day. Looking forward to recounting to you soon.
BILL MCDERMOTT: Thank you so much, Brian. All I can.