When I last spoke to Bill McDermott of ServiceNow, I wrote that the CEO was pointing to a ‘new era’ for the company. That conversation took place shortly after ServiceNow signed a partnership deal with process mining vendor Celonis, and it’s clear ServiceNow is looking for opportunities to dive deeper into record systems.
ServiceNow has historically described itself as a ‘platform of platforms’, tapping into enterprise-wide record systems, and enabling workflow automation to do things more effectively. A layer of interaction, if you will.
This is still true today, of course. But since meeting McDermott today at ServiceNow’s annual Knowledge event, in The Hague, it has become clearer what his ambitions are for the company – and those ambitions certainly involve entering deeper into ERP environments.
McDermott said his ultimate goal is to make ServiceNow the defining enterprise software company of the 21st Century – to become the true enterprise platform standard. Now he has added a variation to this theme and said that ServiceNow is fully compliant with the ‘end to end enterprise environment’.
With that in mind, ignoring the scope of ERP (and supply chain) is a fool. And let’s not forget McDermott’s previous role as CEO of SAP, one of the world’s largest ERP vendors….
So, what is the result of all this? Well, ServiceNow believes there is a ton of metable value in the marketplace in helping organizations modernize their ERP systems, without having to integrate, upgrade or rip them out.
McDermott believes that with the help of Celonis ’recent integration, and with ServiceNow’s recent acquisition of Gekkobrain, ServiceNow can add significant value to customers’ ERP and supply chain systems, saving them a ton of heavy lift when faced with the choice of ‘how they modernize those environments.
In our discussion today, McDermott said:
When it comes to ERP, customers out there don’t want, or they think it’s a good idea, to consume all of their capital in one dimension of their IT budget. When you start to modernize those systems, that takes you years to put in place – or you start to combine a lot of instances of those … and I know that’s a lot. And even if you’re on the right idea, it takes a long time. And it takes a lot of money.
So I talk to a lot of customers today who are saying, what went wrong with my process? As opposed to: why am I upgrading the past? Again, what is wrong with my processes today? How can we fix this? And how quickly can we now start serving the business, running my people, building new relationships with my customer? They want to go now.
Giving customers choice
At diginomica, in recent months, we’ve highlighted how there are opportunities for better automation for ERP environments – as opposed to upgrades, or deleting and replacing existing systems. ServiceNow also seems to see opportunity in this area and seeks to replicate the success it has seen in improving the work done by HCM/HR leaders, in the ERP space.
McDermott said it is still early days to partner with Celonis, but this month the companies will achieve technical integration between the two. That said, he added that there are already some commercial wins with customers recognizing the complementary benefits available (one German airline was mentioned, specifically).
Even earlier, McDermott wasn’t ashamed of why the relationship with ServiceNow was important. He explained:
Our game plan with them is to focus on non-ServiceNow environments, especially ERP environments where we can iX-ray broken business processes and solve those issues using the modern hyper automation layer that is now technically integrated and ready for business.
The reason I say that is that we already have the capabilities to process mining in ServiceNow -related tasks. For ServiceNow customers who want to process mining capabilities into ServiceNow -related tasks, they have it now.
What we’re trying to do is expand the perimeter for environments where we know the world needs us. And we know that by combining, we can do things very quickly. For example, am I modernizing the old record technology system or not? Well, maybe I do, but maybe not now, because I have other needs. And now, we [can give customers] choice.
The most interesting thing is the story of the two cities; where a customer does it the way they always do, and a customer does something else. Because technically, they can.
You’ll see why it’s interesting, I’m sure. McDermott added that for customers who want to integrate ERP instances, or modernize through upgrades, that’s their choice. But he suggested that perhaps there is a simpler option, that ServiceNow rotates towards ERP processes. He added:
The path there would be like one if they didn’t do that. The paths are identical!
And sometimes if you look at the before and after it, the new versus the former, the type of role of ERP and how ServiceNow plays there, it’s identical. So whether you go for ERP modernization or not, our role is identical.
And why customers might take a route involving ServiceNow, McDermott taught speed as a driver. He said:
The thing that I think is interesting, and a lot of people don’t notice, is that we’re already doing the modernization of supply chains. If you think global, versus regional, versus local – there are many dislocations in supply chains in the global economy. But no one will have the time to rip out an ERP and put in a new ERP to deal with a new supply chain.
They need to do it quickly within 30 days. We do that. And a lot of people don’t know it.
Interestingly, shortly after my conversation with McDermott I spoke with ServiceNow CIO Chris Bedi, where he also highlighted an opportunity for ServiceNow to improve ERP environments beyond what the current offer. Bedi said:
If you think about what ServiceNow has done in HR-land, or employee experience, I think the market has already spoken. HCM is great, but you still need something for the employee experience, where HCM is the record system and ServiceNow is the engagement system.
And then if you look at ERP-land, there’s a lot of white space and gray space where things are still happening manually. ERP systems, these are great accounting systems, these are not great workflow systems. And there I could easily see a similar story playing out.
What I take
McDermott has extensive experience in the field of ERP and he knows that people who work and operate in those environments often have very manual driven, less efficient experience. ServiceNow needed the mining process for ERP to make a game for those systems, and in partnership with Celonis it can now do just that. Also, if we’re talking about ‘creating workflow’ across the enterprise – everything from IT, to CRM, to HR – it’s a missed opportunity to ignore ERP. ERP is the engine that drives an organization.
But also, if we think about ServiceNow’s revenue targets ($ 15 billion by 2026, three times its current revenue), it’s worth noting that McDermott also told me:
If you take the TAM of the ERP market, some will say that it is in the region of $ 450 billion, whatever it is, it is in addition to our $ 200 billion TAM. So now you are in a bigger ocean. Not both oceans aren’t big enough, they certainly are.
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