Bill McDermott has landed. Two weeks ago, he stepped down as CEO at SAP after a decade leading the company. Yesterday, ServiceNow announced that he will be its new CEO.
It’s unclear how quickly the move came together but the plan for him is clear: to scale revenue like he did in his last job.
Commenting during the company’s earning’s call today, outgoing CEO John Donahoe said that McDermott met all of the board’s criteria for its next leader. This includes the ability to expand globally, expand the markets it serves and finally scale the go-to-market organization internally, all in the service of building toward a $10 billion revenue goal. He believes McDermott checks all those boxes.
McDermott has his work cut out for him. The company’s 2018 revenue was $2.6 billion. Still, he fully embraced the $10 billion challenge. “Well let me answer that very simply, I completely stand by [the $10 billion goal], and I’m looking forward to achieving it,” he said with bravado during today’s call.
It’s worth noting that as the company strives to reach that lofty revenue goal in the coming years, it will be doing with a new CEO in McDermott, as well as a new CFO. The company is in the midst of a search to fill that key position, as well.
McDermott has been here before though. He points out that in the decade he was at SAP, under his leadership the company moved the market cap from $39 billion to $163 billion. Today, ServiceNow’s market cap is similar to when McDermott started at SAP at a little over $41 billion.
He also recognizes that this is going to be a new challenge. “I’ve seen a lot of different business models, and [SAP has] a very different business model than ServiceNow. This is a pure play cloud,” he said. That means as a leader, he says that has to think about product changes differently, how they fit in the overall platform, while maintaining simplicity and keeping the developer community in mind.
Ray Wang, founder and principal analyst at Constellation Research said that ServiceNow is at a point where it needs an enterprise-class CEO who understands tech, partnerships, systems integrators and real enterprise sales and marketing — and McDermott brings all of that to his new employer.
He sees lots of room for growth at ServiceNow, even though (or maybe because) it is a much smaller company. When asked if this was a step down for McDermott, given the difference in size between the two organization, Wang disagreed: “No. This is the next big thing, a high-growth cloud player. He’s back in a hot company with lots of growth ahead.”
Kenneth Gonzalez, an analyst at Gartner who covers ServiceNow, says this a job that any experienced executive would covet, especially given that this is a stable company instead of a salvage job. “It’s important to recognize that he’s coming into a company with a well-organized and focused leadership team that works well together. He is not being brought in for a recovery operation,” Gonzalez said.
Patrick Moorhead, founder and principal analyst at Moor Insights & Strategy, says that it looks like ServiceNow pulled off a big find when it landed McDermott, and he considers it SAP’s loss. “ServiceNow was doing just fine without McDermott, but when I look at his core competencies, I think he’s there to drive growth through sales expansion. It doesn’t look particularly positive for SAP for McDermott to make what I consider a move to a company 4X smaller in market cap,” Moorhead said.
So while McDermott is moving to a much smaller organization, it’s one that is clearly on the upswing that could benefit from his particular set of skills. One thing to watch for is that while McDermott drove growth during his time at SAP, there was complaining from some customers about strong-arm style sales techniques on his watch. If he can drive growth while avoiding a similar controversy, he will cement his reputation as a top-tier enterprise CEO and help ServiceNow work its way toward that $10 billion goal.
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