Why I’m So Impressed by Surging ServiceNow and Its CEO John Donahoe

(Note: After an award-winning career in the media business covering the tech industry, Bob Evans was VP of Strategic Communications at SAP in 2011, and Chief Communications Officer at Oracle from 2012 to 2016. He now runs his own firm, Evans Strategic Communications LLC.)

If ServiceNow CEO John Donahoe weren't already fully committed to running one of the fastest-growing and most-innovative software companies on the planet, he could make a great living teaching tech-industry CEOs how to talk about the stuff they make and the customers they serve.

With its Q2 2017 revenue up 40.2% to $478.5 million, ServiceNow raised its guidance for full-year revenue to just over $1.9 billion.

A real shot at challenging Workday? I gotta be honest: I didn't see that one coming. And on the strength of those numbers, plus the company's Q2 renewal rate of 97.7%, I moved ServiceNow ahead of Workday in my Cloud Wars Top 10 rankings to #8, and dropped Workday down to #9.

One more set of impressive stats:

• ServiceNow's top two accounts now each exceed $15 million in annual contract value (ACV);
• More than 400 customers are doing more than $1 million in ACV; and
• 32 customers reached that mark of $1 million in ACV in the second quarter.

So what's behind the ServiceNow surge? Here's the customer-centric Donahoe during the company's Q2 earnings call describing how ServiceNow's rapidly evolving and expanding expertise in automating workflows and boosting productivity is winning the hearts, minds and wallets of businesses around the world:

"The area where we're increasing our focus is in the sort of full customer lifecycle, from post-sale all the way through renewal where what I heard from customers was, 'Help me implement and help me get maximum value out of the product, and then help me translate that into business value, that we can demonstrate,' " he said.

"But what we're going to do is put a little more focus on customer success, so that we're capturing and documenting and codifying the business value that gets created, which helps a CIO or an IT department within their organization demonstrate the value they are driving inside their company and frankly helps us on upsells, on price realization and on landing new accounts."

Donahoe came back to that theme repeatedly during his Q&A session with analysts, and on a few occasions used those high-value outcomes of automation, productivity and rigorous value-mapping as the underlying strategy behind ServiceNow's rapid expansion beyond its IT-operations base.

"The world is at an inflection point of intense digital disruption, which necessitates that every company focus on digital transformation," Donahoe said early in his opening remarks. "Every company I talk to is experiencing this.

"For IT organizations, CIOs and C-suite leaders grappling with these changes and challenges, we intend to become an indispensable enterprise-cloud partner and helping them create the future of work."

So ServiceNow's still a company that only helps automate internal IT functions, right? No, and not by a long shot.

While Donahoe and CFO Mike Scarpelli each said more than once that IT service management and IT operations continue to be the biggest businesses for ServiceNow, the company's core attributes—boosting productivity and allowing resources to be optimized by using machine learning and other tools to automate processes—are kicking open new and fast-growing opportunities to do the same in customer service, HR, and security.

In diving into those new markets, ServiceNow is actively leveraging its large and rapidly growing network of partners.

"As I've said before, many of the world's largest systems integrators are rapidly investing in ServiceNow's ecosystem," Donahoe said. "Increasingly, we're being leveraged across the enterprise as customers pull our platform and multi product capabilities into HR, Customer Service Management and security.

And he then offered this striking example of just how quickly those non-IT markets are driving significant new revenue for ServiceNow: "In Q2, 58% of our net new ACV (Annual Contract Value) came outside of ITSM compared with 40% a year ago. And today, three out of every four customers license more than one ServiceNow product."

The expertise ServiceNow is exploiting to drive more deeply into those new big markets includes operational areas where businesses are being flooded with inbound requests—a dynamic that's every bit as true in customer service and security and HR (although it's not really HR, as I'll explain in a moment) as it is in IT.

"You've got high inbound volume and you want to automate how you respond, creating as much self-help as possible and the way you do that is to get to what the root cause of the inbound incidents are. And so our product is very well suited to that to help identify what the root cause is so that you can then remediate without a lot of expensive human interaction," Donahoe said.

"And then, as you know, once we've landed an account, the opportunity to expand laterally into our other products is much easier."

That type of customer-centric extensibility around the core attributes of driving productivity and liberating precious dollars for reinvestment is one of the two primary reasons I'm calling out ServiceNow as the "most-innovative SaaS vendor on the planet."

The other one is that CEO Donahoe just doesn't think or talk like most other tech-industry CEOs—his experiences at Bain and more recently at eBay have surely hammered home in his mind the still-rare understanding of a basic fact: while tech vendors' products are often stunning in their capability and power, all the flash and dash in the world means absolutely nothing to business people unless it helps them be more successful.

Tech execs of the world, there's a big lesson to be learned here! Check out how Donahoe turns a question from an analyst about ServiceNow's "HR product" and turns it into an answer about employee experience and business strategy and winning the war for talent and employee loyalty:

"The change is that virtually every company and every CEO is making modernizing the employee experience a priority, right? Millennials are demanding that they get the same kind of experiences at work as they are getting at home. And so almost every company is saying how can we provide a more compelling employee experience at work. And that's the macro trend that's creating the macro demand.

"Now, what's interesting, when you think about it as employee experience, employee experience is a lot more than just HR—it's their full end-to-end experience, and that's where we excel," Donahoe said.

"So take employee onboarding, which is a multi-departmental experience, right? It touches multiple areas: you've got to get your badge from security, you've got to get your desk from facilities, you've got to get your laptop from IT, you've got to deal with finance, you've got to deal with compliance, you have to deal with HR.

"So it's more than just an HR experience, it's the full end-to-end experience.

And that's where our platform and our capabilities are really strong. Same thing with HR case management, and same thing with employee portal which is by definition a multifunctional portal," he added.

"And so our sweet spot is something that can help drive end-to-end good experiences, workflows, the way talk about it, to improve the employee experience."

Also, in taking this route of offering an HR SaaS products that are not really about HR, ServiceNow avoids the huge challenge of directly banging heads with HCM specialist Workday as well as with broad-based SaaS giants SAP (#4 on my Cloud Wars Top 10) and Oracle (#6).

"That's what's driving really strong demand for our HR products and we think that's going to continue," Donahoe said. "And I'll note, as I have several times, that is very complementary with what the HCM providers are providing.

"It's not in competition with them, but very complementary to provide the best end-to-end employee experiences for our customers."

Ultimately, because of that unique positioning Donahoe just described, ServiceNow has to continue dazzling customers with dependable execution and relentless consistency in what it delivers, how it delivers it, and how customers can quickly and easily discern the ROI of doing business with ServiceNow.

Donahoe says that's all part of ServiceNow's evolution as a platform company—not a technological "platform" along the likes of Microsoft Azure or SAP HANA or Oracle Database—but rather a platform for business productivity and asset-optimization and superb employee and customer experiences.

"It's striking to me is that when you actually get inside these customers and talk to them, they view [ServiceNow] as a platform," Donahoe said in response to a question about whether his IT business will remain as important in the future as it is now.

"I mean, this is not a series of disparate products that are unrelated to one another. In many or most cases, customers have embraced our platform. And even though the decision-maker in HR or security or customer-service management is not the CIO explicitly, the CIO and IT do play a role both because we've established credibility and payback in IT. And IT is involved in the implementation outside of IT as well."

It's always fascinating to see a niche player successfully transition into a broad supplier and partner. With ServiceNow's heady growth rates and Donahoe's customer-first obsession, ServiceNow has hit the big time as a major cloud vendor and innovation machine.

I just launched a Facebook page. Let's connect: Bob Evans IT.

This article originally appeared on Forbes.