ServiceNow at $5 BILLION in ARR!! How They Do It

ServiceNow automates a ton of workflows in the enterprise, but its roots are in managing it and other assets, which sounds niche, but it's not. It's huge in the Global 2000 as we'll see. And it is the fourth or fifth biggest cloud company. It's worth well over $100 billion. State importantly, it has 1100 $1 million a year customers. So that's about as enterprise as it can get. So what can we learn from ServiceNow that maybe all of us can apply if we're doing somewhat bigger deals? Point number one is that even at 5 billion in AR 5 billion still growing 32%. That's pretty crazy. And let that sink in a bit. If nothing else, it's a challenge that the best companies, the best founders always find a way to grow, that there is no ceiling to growth. And for those of us that have been doing SaaS for a while, this is maybe the most shocking thing, that there isn't a ceiling to growth. We all back in the day thought maybe 100 million ARR was as big as a lot of markets could get. Maybe a little bit bigger. Maybe we'd stall out even a 40 to 50 million ARR. Maybe Salesforce would be the only really big player. But it's not. ServiceNow is huge. Shopify is huge. Zoom is huge. Salesforce is not the only folks doing billions and billions doing 5 billion in ARR. It's going to become more and more common. So it's pretty incredible what ServiceNow can do. Okay, interesting learning. Number two from ServiceNow. As we talked about before, 11001 million ACV customers. And importantly, the count's still growing 23%. It's got 1100 million dollar customers. The count is still growing 23%. So let that sink in for a minute. If you're going enterprise, there's these wonderful milestones you'll have as a founder. Your first 20 or 30k deal. Your first 100k deal. I invested in a founder that just this week had their first $1 million a year deal. It's incredible. And then you think, well, if I got one, I can get another. I can get another million dollar, another. But we must run out of customers, right? I mean, how many customers are there in the Fortune 500? I mean, well, 500, but there's a lot in the world. The Global 2000s, 2000. And it turns out there's even more than the Fortune 500 that can pay a million a year in ServiceNow shows that they have 11001 million plus ACV customers growing 23% a year. That means they'll soon, in just a few years, in three, a little over three years, come up with $2001 million plus customers. So look, it's hard to close big deals. The sales cycles are long. You need to button down security, you need to sell to multiple stakeholders. It's a long slug for a while, but don't let anybody tell you there's not enough of them. ServiceNow shows you you can get $1,001 million your customers if you do something that really matters in the enterprise. Point three for ServiceNow and it's very interesting to see this true at so many SaaS and cloud leaders, which is a key to their growth after 1 billion AR is multiple products and workflows. We've seen this with Box, we've seen it with datadog, we've seen it with Viva, we've seen it with Twilio that your core product can get you pretty far, maybe all the way to 100, even 200 million in revenue, further than you'd think. But at some point, as you approach 100 million, or maybe even later, maybe as you approach a billionaire, you need another product to fuel growth from your customer base. One is not alone. We recently saw this with PagerDuty. PagerDuty IPO'd is mostly a single product for SMBs at 125 million in AR. But as it hit 250 million, it needed multiple products to go more Enterprise and Take ServiceNow. That original product we talked about in the beginning, it's it workflow product, it's heart. What got it to that first 100, even billion in AR, it got it pretty far. Today at 5 billion AR, it's just 62% of revenues, which is a lot, but it's less than two thirds and its expansion has grown rapidly. A year ago it was just 10%. Now it's already 25% or all these other workflows. So just plan on it. Think about it. If you're going to sell the bigger customers, you will probably need multiple products. You do not need them on day one and it will be a distraction. But box needed them. PagerDuty, Twilio and ServiceNow. So think about it. Think about how a second or third product could add so much more value to your customers that that will fuel your further growth. Point four, and this is interesting is they waited to monetize their platform, just like Shopify and Zendesk and others have. And its platform, its partners did not cross 10% of its revenue until 2019. And I get worried when I see startups trying to over monetize partners. Wait. It's almost better to wait, become number one. Eventually all the folks in your ecosystem will want to build on the next Salesforce, the next Shopify. Think about it. Shopify has thousands and thousands of partners and almost no other e commerce player can touch it. Adobe Magento can't touch that. BigCommerce can't touch it. Wix and Square Squarespace at the low end can't touch it. So be careful about throttling that back by trying to over monetize your partners. It's where you've really got to go long. And it's interesting that again, it wasn't until 2019 that ServiceNow well past a billion in revenue that partners were even 10% of the revenue. But fast forward to today at 5 billion it's 15%. So you do want to monetize those partners, don't get me wrong. But maybe wait a really really long time. Okay, last key point on Serves now. Then we'll hit a few bonus learnings but now and get granted. Serves now is very enterprise. It's not like some companies that we'll speak today that we've talked to that have customers small, medium and large. But they have 99 and they're very enterprise. But they have 99% logo retention rate. So think about that for a minute. 99% of ServiceNow company customers stay year after year. Now they often sign three year contracts. We'll touch on that in a minute. But nevertheless 99% logo retention. So look, most of you won't do that. For most of you, even 90% logo retention is pretty impressive in the 90s. But you can do better. Take this as a challenge. You can do better. ServiceNow is 99% logo retention. There's no reason wherever you are in the 80s or 90s, you can't do better. ServiceNow proves that you can't. Okay, point six. Just interesting to note since we're talking enterprise, we'll hear different stories around professional services. Folks like Qualtrics with Zig speaking have an impressive professional services business that's profitable. So does Viva. It's probably though just as common that folks try to minimize the amount of services they do in house. And that's what ServiceNow and Salesforce do. ServiceNow only gets 5% of its revenues from services even though it's at 5 billion AR. That was a bit of a surprise for me since it's so enterprise. I assume like Qualtrics and Viva it would have a thriving services business. Maybe 20% of its revenue that was profitable. Not as profitable as software, but profitable. But no, they don't want to do services. So what they do, what ServiceNow and Salesforce and others do, Shopify does this and does Atlassian is they build an ecosystem and they, they have partners do those services. And that has pros and cons. But ServiceNow and Salesforce have done a great job of nurturing that, that, that, that implementation ecosystem so they don't have to do the enterprise work at the cost of not having that revenue. Qualtrics gets a 20% revenue boost by doing it in house. ServiceNow doesn't have to do deal with the lower margin and the headaches of having a bunch of basically cons consultants running around deploying ServiceNow.7 Just interesting for the enterprise. At 5 billion revenue, ServiceNow is 36% of its revenue from outside North America. That's pretty common. The average SaaS company probably has about 60% of its revenue in the U.S. so ServiceNow is just like that. Most folks that started here, it's just a reminder to don't let that international revenue go. Especially in the enterprise, especially when it's a lot of work to service these international customers. Where you may need field offices, you may need field offices even at a few million in revenue. But do it, do it because 40% of your revenue is outside the US and you're going to want that growth. Okay, and the Last point eight of the five most interesting learnings on ServiceNow is that new customers sign three year contracts and they renew for two. A three plus two. So it's interesting, we've seen things all across the board. In general Zoom during COVID actually moved to more monthly contracts. A majority of monthly is people just immediately SMBs immediately came on the platform. ServiceNow is 3 years plus 2 years. Smartsheet is 1 year. Even with SMBs there is a magical answer for each vendor. But there's no one answer to this. And a three year contract like ServiceNow certainly creates some friction in the sales process. But perhaps if you have a year sales cycle and 99% logo retention, it's okay. They are committing to business process change, massive change. And a three year contract may be fine. But it's interesting that even Salesforce doesn't standardize on three year contracts. But ServiceNow has. It's a three year deal and you renew for two years. Qualtrics is standardized on one. Zoom is sort of all over the place and is cool with monthly, but it's a reminder that for million dollar big contracts, multi year contracts may be just fine.