TECH’S ULTIMATE SECOND ACT
Facing 50, Fred Luddy lost his job and his fortune. But in applying the lessons of his failures, he made Service Now the most innovative company in America—and himself a late-career billionaire.
FACING 50, FRED LUDDY LOST HIS JOB AND HIS FORTUNE. BUT IN APPLYING THE LESSONS OF HIS FAILURES, HE MADE SERVICENOW THE MOST INNOVATIVE COMPANY IN AMERICA—AND HIMSELF A LATE-CAREER BILLIONAIRE.
Vegas being Vegas, fans have crammed the Venetian Hotel for selfies with a graying celebrity working his way through the scrum: Fred Luddy, the 63-year-old founder of ServiceNow, America’s hottest IT services company. Neither Wayne Newton nor Celine Dion, Siegfried nor Roy, has anything on Luddy in Sin City this day, at least among the 18,000 customers, vendors and employees in town for Knowledge, ServiceNow’s annual developers conference.
“When all of these people are happy to see you, honestly you feel like a rock star,” says the sparkly-eyed Luddy, having booked extra time between appearances to grip-and-grin with the adoring hordes. “It’s kind of an undeserved feeling, because they were the inspiration. You folks had all of the ideas. I just wrote them down and thought about them.”
Forgive Luddy such indulgences. Fourteen years ago, he was pretty much broke, having seen a $35 million personal fortune vanish overnight in the midst of accounting fraud at his previous company. Thirteen years ago he was a one-man shop, tinkering with ServiceNow’s core product from his home. Even after the vindication of an IPO six years ago, the company was worth a modest $2 billion.
These days ServiceNow, based in Santa Clara, California, maintains a $30 billion market cap—and the No. 1 ranking on the
2018 Forbes Most Innovative Companies
servicenow’s customers include 850 of the Global 2000 biggest companies.
list. The 6,000-person-plus company has more than 4,000 customers, including 850 on the Forbes Global 2000 list of the world’s biggest public firms. Last year it had revenues of $1.93 billion, and growth is expected to be more than 30% this year. More than 500 companies spend at least $1 million annually on ServiceNow’s products.
What are they getting? A simple, flexible workflow that allows employees to easily manage their requests from IT. Much as Salesforce enables a company to manage its external clients by keeping a record of all contacts and interactions (and, increasingly, by telling sales reps what their next step should be), ServiceNow promises an internal system to meet the needs of employees, beating out legacy IT service-management software players like BMC Software, Hewlett Packard Enterprise, Cherwell Software and CA Technologies to claim half of that market.
The special sauce—the thing that gives ServiceNow the fat “innovation premium” that drives our ranking— comes from two product traits with the potential to scale: simplicity and customizability. ServiceNow’s IT tools don’t require the IT department to set them up. Once running, they offer a single collection center for requests, data points and checklists, all of which can in turn be analyzed by algorithms to predict needs, flag concerns and measure efficiency. Even in a business where renewal rates are commonly at least 90%, ServiceNow stands out at 98%. “They have cemented themselves as the number one IT partner for the biggest companies in the world, and they don’t get fired,” says Alex Zukin, an analyst at Piper Jaffray. All those traits point to a future beyond just IT services.
But Luddy’s triumph also comes from innovation in management: specifically, the rare founder trait of knowing when it’s time to step aside and let someone else run your baby. Luddy transitioned from CEO to chief product officer in 2011. “Fred has been a wonderful counselor, coach, friend, as well as someone who challenges us to constantly improve our user experience, constantly make sure our products are easier and easier to use,” says the current CEO, John Donahoe, who previously served as CEO of eBay.
Ego restraint pays, at least on our list, as ServiceNow