Cloud Stocks: ServiceNow Firing On All Cylinders But One: Startup ISVs

Prior to the acquisition, Element AI had raised $257.5 million from four rounds of funding from investors including the Government of Quebec, DCVC, Hanwha Asset Management, Pegasus Tech Ventures, McKinsey and Company, Real Ventures, Caisse de Depot et Placement du Quebec, Business Development Bank of Canada, Canadian Government, and Fidelity.

ServiceNow’s Stellar Growth

ServiceNow is seeing strong traction in its IT workflow products as organizations accelerate their digital transformation initiatives. ITSM delivered 17 deals over $1 million. Its AI and machine learning capabilities embedded within its Pro SKU is also seeing strong growth. ITSM Pro penetration is now more than 20%. The AI/ML capabilities of its Pro SKUs are automating processes to allow people to focus on business-critical activities. It saw a three times increase in usage of its virtual agent technology in 2020 and its Element AI acquisition will continue to add focus on the service.

ServiceNow is no longer being viewed as a back-end IT-oriented solution; instead with its AI, ML capabilities, it is beginning to be seen as a strategic partner that impacts the entire business of an enterprise. This is reflected in the significantly high number of deals that it is adding within the ITSM and ITOM markets. Its Governance, Risk, and Compliance offerings along with the App Engine is also seeing strong growth. ServiceNow appears to have a clear line of sight to its $10 billion cloud revenue target. Currently, 20% of its customer base is also an ITSM Pro customer. ServiceNow is working on deepening this penetration as the ITSM Pro service comes with a 25% uplift.

I also think that ServiceNow will continue to see growth on account of its PaaS-focused strategy. ServiceNow’s Now platform can be utilized to automate digital processes across the organization. It features robust low-code no-code application development and integration capabilities. Its low-code application development platform, the Now Platform App Engine, enables organizations to build custom desktop and mobile applications that can be used to automate and digitize workflows. ServiceNow claims that the App Engine helps enterprises bring apps to the market in half the time and a third of the cost. As customers and developers continue to build on the Engine, usage, and customer adoption will only grow.

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Disclosure: All investors should make their own assessments based on their own research, informed interpretations and risk appetite. This article expresses my own opinions based on my own ...

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