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The growing adoption of generative AI is putting software-as a-service company ServiceNow “at the center of the biggest enterprise software market opportunity and transformation in a generation,” CFO Gina Mastantuono said.
Momentum for the Santa Clara, California-based software platform has continued to accelerate throughout the year, driven in large part by the response to its new GenAI products, the adoption of which represent the quickest-growing product introduction in the company’s history, Mastantuono said in a interview.
“Growth that fast, it means that the enterprise market customers are really leaning into this AI adoption curve, much faster than any curve we've seen in the past,” she said.
The company’s swift move to integrate GenAI across its platform led to a robust Q3, with ServiceNow reporting a 23% jump in subscription revenues year-over-year to reach $2.7 billion, according to its earnings report. The segment represented the bulk of the nearly $2.8 billion in total revenues it reported for the quarter ended Sept. 30.
Getting ahead of the AI agent curve
The software provider has moved swiftly to establish its bona fides in the budding generative AI sector, announcing its AI-powered “Now Assist” tools in September 2023 — bringing GenAI into its IT service, customer service management and HR service delivery offerings, among others, according to a company press release.
The company’s push to bring AI into its offerings has led to strong results over its past several quarters, with the jump in subscription revenues for its Q3 following after such revenues also increased by 23% in the prior quarter, according to the company. ServiceNow has been investing in AI for some time now, which puts it in a strong position to “continue to be successful because of all of the innovation that we've been driving,” Mastantuono said.
The company also raised its full year guidance following the quarter, now anticipating subscription revenues between $10.65 billion to $10.66 billion, compared to the $10.57 billion to $10.58 billion range forecast in Q2.
At the top of September, the company announced its AI-powered Xanadu platform, and, in a separate release, announced its plan to integrate so-called “AI agents” or “agentic AI” across its platform to assist customers with everything from customer service to IT management.
“If you just think about having teams of these AI agents that can independently solve problems and tasks and multi-processes using human-like reasoning and comprehension, it’s pretty remarkable,” she said. Mastantuono has served as the CFO for the SaaS company for three years, with previous roles including a stint as CFO for Ingram Micro and as SVP, controller and chief accounting officer for Revlon, according to her LinkedIn profile.
The AI agent solutions can help to add value to customer service or IT representatives in a way that saves both money and time for companies, Mastantuono said.
Interest in so-called “agentic AI” or “AI agents,” the use of the technology to execute manual tasks automatically in a way that mimics human assistants, has ramped up among business leaders in recent months. OpenAI-backer Microsoft recently announced it would be adding 10 new autonomous assistants to its Microsoft Dynamics 365 platform, for example, while Big Four firm KPMG is in the midst of prototyping several such agents as it looks to become a leader in the space, CFO Dive previously reported.
Interest in AI agents is growing at a time when more and more workers are reporting concerns over how AI’s introduction is impacting their own roles — a recent survey by Grant Thornton found 28% of U.S. employees are worried AI will replace them in their current positions or reduce their roles, CFO Dive recently reported.
However, AI agents don’t represent a tool that can supplant human employees, but rather ones that can provide key assistance, Service Now CEO Bill McDermott said. Utilizing AI agents is like “hiring an additional workforce to support people by doing the jobs they've never wanted to do in the first place,” McDermott said during the company’s Q3 earnings call.
AI agents can utilize human-like reasoning skills to help provide customer service agents with all the key information they need during a customer interaction — aggregating all of the information on the customer and what they’ve asked for ahead of time to cut down on friction, Mastantuono said.
ServiceNow will be launching the first use cases for its AI agents this month, and is “really excited about the future of how AI is going to really shift and shape enterprise technology in a pretty meaningful way,” she said.
Moving from experimentation to implementation
While GenAI remains in the early innings, the opportunity it offers is “enormous,” Mastantuono said. The company’s remaining performance obligations for the quarter “is really signifying the long term momentum” for the business, she said, with RPOs for Q3 reaching $19.5 billion, a 36% increase year-over-year.
AI could fully transform the way many businessesa are working today, and the technology’s adoption curve is already much steeper than that of the cloud—the last major technological shift.
“The move to the cloud was all about efficiency. The move to AI is not just about efficiencies,” she said. “It's really about how are business models going to shift, how our workflows going to change, to get products to market faster, to get customers to value faster? And I think that's a real game changer for business in general.”
ServiceNow’s AI growth comes as CFOs and other business leaders weigh the pros and cons of the emerging technology, seeking the best use cases and return on investment for such tools.
“One of the things that I'm talking to customers about is, how do we move from experimentation in AI to real implementation?” Mastantuono said. “And what is an enterprise that's fueled by AI going to look like?”
