TECH’S UL­TI­MATE SEC­OND ACT

Forbes - - CONTENTS - By kath­leen Chaykowski and mark Coat­ney

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

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