5 Interesting Learnings From ServiceNow at $5 Billion in ARR

So ServiceNow for many of us is a SaaS company we’ve sort of heard of, but don’t know that much about.  There’s a reason. They just crossed 1,100+ $1m ACV customers! Now that’s enterprise!  So you probably don’t use ServiceNow yourself to track your IT and other assets.

But bigger customers sure do.  And ServiceNow has now joined Salesforce, Shopify and Zoom at another SaaS leader worth a stunning $100 Billion (!)

Let’s take a look at 5 Interesting Learnings:

1. Still growing 32% at $5B in ARR.  This is pretty stunning, and justifies the $100B market cap.  Even at $5B in ARR, ServiceNow is still growing at 32% year-over-year.  And much faster than most peers at this scale.

2. 1,100 $1m+ ACV customers — and the customer count here is still growing 23%.  This is again pretty stunning.  Not only has ServiceNow crossed 1,100 customers paying $1m a year or more … but the momentum is still continuing.  $1m+ customers are growing 23% by logo!  ServiceNow has hardly maxxed out its large customer base yet, compared to say Salesforce’s CRM segment, which is quite mature.

3.  New Products and Workflows Fuel Growth After $1B in ARR.  We see this again and again, with Box, with Datadog, with Veeva, with Twilio, and more.  The “core” product often takes you quite far — farther than you’d think — but as some side of $1B in ARR, you need another product to fuel growth from the customer base.  ServiceNow’s core IT workflow product is now just 62% of its total revenues, with its expansion into customers and employee workflows now ~25% of revenues, and its platform up to 15%, from just 10% a year back.

4.  Waited to monetize platform, like Shopify.  Building on the prior point, ServiceNow’s revenues from its platform didn’t cross 10% of its overall revenue until 2019.  We see many SaaS leaders waiting before taking too much out of the pockets of its partners. It’s almost always better to wait, unless your platform is your product.  It’s almost always better to get every partner building on your platform, and taking a bigger rake later.

5. A stunning 99% logo retention rate.  99% of their customers stay year after year.  Now as we’ll see below, they do sign 3+ year contracts :).  But still, it’s a stunning example of keeping enterprise customers for life.

Some bonus learnings:

6. Only 5% of its revenues from professional services.  This is a bit of a surprise, and a big contrast to some other enterprise players like Qualtrics, Veeva, etc.  The number is in some ways artificially low, in that like Salesforce, ServiceNow has built up a large ecosystem of partners to handle deployments, configuration, and other lower-margin professional services. It’s still interesting to see it so low, however.

7. 36% of Revenue from Outside North America.  Similar to what we see with others, with 26% from Europe/EMEA and 10% from APAC.  Don’t be too U.S. focused, even in the early days.  This is basically how SaaS looks today.  60% or so of the revenue is still in the U.S.  But 40% isn’t.  If it does find you, don’t run from it.  Embrace it.

8. New Customers Sign 3 Year Contracts, Renewals for 2 Years.  It’s interesting to see contract terms presented this way.  We’ve seen leaders like Qualtrics standardize on 1 year contracts, and others like Zoom keep plenty of shorter-term customers.  But ServiceNow isn’t doing that.  You sign a 3 year contract to start, and a 2 year renewal.  With a $1m+ ACV, buy-out contracts will be a tough strategy for the competition.