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A recent report published by MarketsandMarkets expects the IT Service Management (ITSM) market to grow from $4.41 billion in 2016 to $8.78 billion by 2021, which translates to an annualized growth rate of nearly 15% over the next five years. The growth in the industry is driven by the continuing adoption of mobile and Bring Your Own Device (BYOD) policies across organizations. But that is not the only cloud-based enterprise service that is expanding. Another report by by Gartner estimates the global Public Cloud Services market to grow from $209 billion last year to $383.5 billion by the year 2020 with enterprise offerings of human capital management (HCM), customer relationship management (CRM) and the financial application services becoming the second largest line of business. Gartner expects these services to grow from $38.6 billion last year to $75.7 billion by 2020.
ServiceNow’s Financials
ITSM provider ServiceNow (NYSE: NOW) recently announced impressive second quarter results. Revenues for the second quarter grew an impressive 40% over the year to $478.5 million, ahead of the market’s expectations of $463 million. Loss per share of $0.25 was significantly higher than the Street’s forecast loss of $0.18 for the quarter. Adjusted earnings of $0.22 per share were better than the market’s projected EPS of $0.20.
By segment, Subscription revenues accounted for 87.2% of total revenue and grew 43.5% to $417.1 million. Professional Services revenues grew 21% to $61.5 million. Total billings for the quarter grew 35% to $504.9 million, falling short of the earlier forecast range of 36-37% growth. Subscription billings grew 37% to $456.6 million, and Professional Services and other billings increased 15% to $48.3 million.
ServiceNow began as a Cloud-Based ITSM provider. But it is no longer focused only on ITSM and has diversified its offerings to other cloud-based enterprise services to keep in line with the growing demands of the market. During the quarter, 58% of its net new ACV came outside of ITSM compared with 40% a year ago. The company also noted that today nearly 75% of its customers used more than one ServiceNow product including HR, Customer Service Management and security services. Its HCM offering is seeing strong adoption and it recently added a leading airline to its customer list with net new ACV of almost $3.5 million. Its Customer Service Management product is also doing well and it recently debuted in Gartner’s Magic Quadrant.
