Here's why ServiceNow CEO says that the 'race' to go digital will be even more urgent in a post-pandemic world

• The need for digital transformation will continue post-pandemic, ServiceNow CEO Bill McDermott said.
• People adjusted to communicating quickly with businesses online and that won’t change as society reopens, he said. 
• That dynamic will result in continued demand for ServiceNow’s workflow automation tools, he said. 
• See more stories on Insider’s business page.

As businesses eye a post-pandemic future, the demand for software services that help them move online isn’t going to let up, according to ServiceNow CEO Bill McDermott. 

“The world got a shock with the COVID environment, where it had to go digital. But that work is still ongoing,” McDermott told Insider following the firm’s first quarter earnings on Wednesday. “Because now that everybody realized that digital transformation is the only way forward, it’s a race — competitively — in every industry.” 

During the pandemic, people have adjusted to communicating quickly with businesses online and McDermott doesn’t see that changing as society begins to reopen. That, in turn, will continue to be a boon for the company, which makes makes software that automates business processes to help its customers work more efficiently. 

McDermott’s comments reflect his previous stance on the shift to digital post-pandemic:

“Digital transformation is the opportunity of this generation” he told Insider in January. “The ones that are in the lead will extend the lead and the ones that aren’t, they better catch up really fast. And in all cases, no matter what goes on with the general economy, the one thing that won’t be special to the to-do list is digital transformation.”

The firm’s stock was down about 8% on Thursday, even though ServiceNow beat analyst expectations on both the top and bottom line. RBC analyst Matthew Heldberg, in a note to clients, attributed that drop in part to the company’s revenue guidance, which showed slower-than-expected growth. However, he added that ServiceNow is “building a stronger growth story” and that it was likely a “conservative approach to adjusting guidance.”

The company posted $1.36 billion in revenue for the quarter, or 30% growth from a year prior, and predicted 27% to 28% full-year revenue growth. 

McDermott said that ServiceNow has seen an increase in customers buying into the firm’s full platform of services, versus only signing contracts for specific tools, and added that he sees opportunity for it to increase the firepower of its sales team, which can integrate what it learned about selling digitally with its previous in-person practices as things start to open up. 

“We have the skills that go along with digital and how you market to your customer digitally,” McDermott said. “But now you also go back to your strength, where you go direct to your market with a direct sales force.”

William Blair analyst Arjun Bhatia wrote in a note to clients that “the fundamentals of the business remain strong.” He also acknowledged McDermott’s optimism:

“Now, as the economy recovers, budgets open up, and customers focus on more strategic projects, management struck a bullish tone about the company’s ability to add new logos and reaccelerate net-new [annual contract value] as the year progresses, citing a recent swell in the company’s pipeline.”

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