ServiceNow, Inc. (NOW): Business Model Canvas [10-2024 Updated]

ServiceNow, Inc. (NOW) has revolutionized the way organizations manage their digital workflows, establishing itself as a leader in cloud computing solutions. At the core of its success is a well-defined Business Model Canvas, which outlines key partnerships, activities, and resources that drive value for diverse customer segments. In this post, we delve into the essential components of ServiceNow's business model, revealing how it creates value through innovative technology and strong customer relationships. Discover how this dynamic company maintains its competitive edge and continues to expand its market presence.

ServiceNow, Inc. (NOW) - Business Model: Key Partnerships

Collaborations with IT service providers

ServiceNow collaborates with various IT service providers to enhance its service offerings and improve customer experience. These partnerships allow the company to leverage external expertise and resources. As of September 30, 2024, ServiceNow has reported a total of 2,020 customers with an annual contract value (ACV) greater than $1 million, showcasing the effectiveness of these collaborations.

Partnerships with cloud service platforms

ServiceNow has established alliances with major cloud service platforms, which facilitate the hosting of its solutions and enhance scalability. The company’s subscription revenues from cloud services increased by 23% year-over-year, amounting to $7.78 billion for the nine months ended September 30, 2024. This growth in revenue is partly attributed to the strategic partnerships that ServiceNow has forged with cloud providers.

Alliances with system integrators

Strategic alliances with system integrators play a crucial role in ServiceNow's business model. These partnerships allow for smoother implementations of ServiceNow's solutions across various industries. The company's professional services and other revenues increased by $28 million during the nine months ended September 30, 2024, reflecting the impact of these alliances in enhancing service delivery.

Engagement with third-party consultants

ServiceNow actively engages third-party consultants to expand its reach and capabilities. This engagement has led to an increase in partner ecosystem investments, which rose by $12 million for the three months ended September 30, 2024, compared to the previous year. Such partnerships are essential for providing additional resources and expertise to maximize customer value realization.

Partnership Type	Impact on Revenue Growth	Key Financial Metrics
IT Service Providers	Increased customer base and retention	2,020 customers with ACV > $1M
Cloud Service Platforms	23% YoY growth in subscription revenue	$7.78 billion in subscription revenue for 9 months
System Integrators	Enhanced service delivery and implementation	$28 million increase in professional services revenue
Third-Party Consultants	Improved customer value realization	$12 million increase in partner ecosystem investments

ServiceNow, Inc. (NOW) - Business Model: Key Activities

Development of the Now Platform

The development of the Now Platform is a cornerstone of ServiceNow's operations, facilitating the delivery of digital workflow solutions. In 2024, ServiceNow reported subscription revenues of $2.715 billion for Q3, reflecting a 23% increase year-over-year. This growth is attributed to the expansion of the Now Platform, which integrates various services and applications for enterprise customers.

Continuous innovation in digital workflows

ServiceNow invests heavily in research and development to maintain its competitive edge. The company allocated $626 million to R&D in Q3 2024, a 14% increase compared to the same quarter in 2023. This investment supports continuous innovation in digital workflows, enhancing the platform's capabilities and addressing evolving customer needs.

Customer support and training services

Customer support and training services are critical to ensuring customer satisfaction and retention. In Q3 2024, ServiceNow's professional services and other revenues reached $82 million, a 14% increase from the previous year. The company emphasizes training and support to help clients maximize the value of their investments in the Now Platform.

Marketing and sales efforts to expand market reach

ServiceNow's marketing and sales strategies are designed to broaden its market reach. Sales and marketing expenses in Q3 2024 were $944 million, an 18% increase from Q3 2023. The company is focusing on enhancing sales productivity and marketing efficiencies, with a renewal rate of 98% maintained over the past year.

Key Activities	Q3 2024 Revenue (in millions)	Year-over-Year Growth
Subscription Revenues	$2,715	23%
Professional Services and Other	$82	14%
Sales and Marketing Expenses	$944	18%
R&D Expenses	$626	14%

ServiceNow, Inc. (NOW) - Business Model: Key Resources

Proprietary technology and software solutions

ServiceNow, Inc. is primarily known for its cloud-based platform that provides digital workflow solutions. As of September 30, 2024, the company's subscription revenues reached $2.715 billion for the quarter, indicating a 23% increase from $2.216 billion in the same quarter of 2023. The overall subscription revenue for the nine months ended September 30, 2024, amounted to $7.780 billion, compared to $6.315 billion in the previous year, reflecting a similar growth rate of 23%.

Skilled workforce and R&D teams

ServiceNow places a strong emphasis on its skilled workforce, particularly in research and development (R&D). For the three months ended September 30, 2024, R&D expenses totaled $626 million, up from $549 million in the same period of 2023. This increase reflects the company's commitment to enhancing its technological capabilities and developing new solutions to meet customer needs.

The total stock-based compensation related to R&D for the nine months ended September 30, 2024, was $479 million. The workforce is crucial for maintaining the innovation necessary for the company's competitive edge in the software market.

Data centers for service hosting

ServiceNow operates a robust infrastructure to support its cloud services, which includes multiple data centers. As of September 30, 2024, the company reported property and equipment, net, of $1.718 billion, which includes substantial investments in data center capacity and technology. The increase in expenses associated with data center capacity was $19 million for the three months ended September 30, 2024, compared to the previous year.

Strong brand reputation and customer base

ServiceNow has established a strong brand reputation in the IT service management (ITSM) sector, with a growing customer base. As of September 30, 2024, the company had 2,020 customers with an annual contract value (ACV) greater than $1 million, up from 1,772 in the previous year. This demonstrates the company's ability to attract and retain high-value clients, which is essential for sustaining revenue growth.

As of September 30, 2024, the company's remaining performance obligations (RPO) totaled $19.5 billion, indicating a solid future revenue stream. The RPO grew by 36% year-over-year, with approximately 48% expected to be recognized as revenue in the next 12 months.

Key Resource	Data Point	Comparison (YoY)
Subscription Revenue (Q3 2024)	$2.715 billion	+23%
R&D Expenses (Q3 2024)	$626 million	+14% from Q3 2023
Property and Equipment (Net)	$1.718 billion	—
Customers with ACV > $1M	2,020	+14% from 2023
Remaining Performance Obligations (RPO)	$19.5 billion	+36%

ServiceNow, Inc. (NOW) - Business Model: Value Propositions

Streamlined digital workflow solutions

ServiceNow provides a comprehensive suite of digital workflow products that facilitate seamless operations across various business functions. The company's subscription revenues from digital workflow products amounted to $2.398 billion for the three months ended September 30, 2024, representing a 22% increase from $1.961 billion in the same period of 2023. For the nine months ended September 30, 2024, revenues reached $6.877 billion, up 23% from $5.587 billion in 2023.

Enhanced productivity through automation

ServiceNow's automation capabilities are designed to enhance productivity by reducing manual tasks and streamlining processes. The gross profit margin for subscription services remained stable at 82% for both the three and nine months ended September 30, 2024, indicating efficient management of service delivery costs. The company has seen a substantial increase in the number of customers utilizing automation features, with a 36% growth in revenues from outside North America, highlighting the global demand for automated solutions.

High customer satisfaction and retention rates

ServiceNow has achieved high customer satisfaction rates, evidenced by the increase in annual contract value (ACV) customers. As of September 30, 2024, the number of customers with ACV greater than $1 million reached 2,020, up from 1,772 in 2023, reflecting a significant 14% growth in high-value customer relationships. The company's focus on customer success is further supported by a 79% overall gross profit margin, which demonstrates effective cost control and value delivery.

Scalable solutions for diverse industries

ServiceNow offers scalable solutions tailored to various industries, allowing businesses to adapt the platform to their specific needs. Subscription revenues from IT Operations Management (ITOM) products reached $317 million in Q3 2024, a 24% increase from $255 million in 2023. The company's total revenues for the nine months ended September 30, 2024, amounted to $8.027 billion, reflecting a robust 23% growth compared to $6.534 billion in the previous year.

Metric	Q3 2024	Q3 2023	Change (%)	YTD 2024	YTD 2023	Change (%)
Subscription Revenues	$2.715 billion	$2.216 billion	22%	$7.780 billion	$6.315 billion	23%
Digital Workflow Products	$2.398 billion	$1.961 billion	22%	$6.877 billion	$5.587 billion	23%
ITOM Products	$317 million	$255 million	24%	$903 million	$728 million	24%
Gross Profit Margin (Subscription)	82%	81%	1%	82%	82%	0%
Number of Customers with ACV > $1M	2,020	1,772	14%	—	—	—

ServiceNow, Inc. (NOW) - Business Model: Customer Relationships

Personalized customer support

ServiceNow offers personalized customer support through a dedicated customer success team that assists clients in maximizing the value of their subscriptions. The company's support model includes a tiered approach, allowing customers to access varying levels of service based on their needs. As of September 30, 2024, ServiceNow reported a 98% renewal rate, demonstrating strong customer satisfaction and engagement.

Community engagement through user forums

ServiceNow fosters community engagement through user forums and online communities. The ServiceNow Community allows users to share insights, ask questions, and collaborate on solutions. This platform has grown to include over 500,000 registered members as of the end of Q3 2024. The engagement in these forums supports a collaborative environment where users can help each other, leading to enhanced customer relationships.

Regular training and educational resources

ServiceNow invests in training and educational resources for its customers. The company offers a variety of training programs, including online courses, certifications, and workshops. In 2024, the total number of training sessions provided reached over 10,000, with participation from more than 30,000 users. This initiative not only helps customers utilize ServiceNow’s products effectively but also strengthens loyalty.

High renewal rates indicating strong loyalty

ServiceNow’s customer loyalty is reflected in its high renewal rates. The company has consistently achieved a renewal rate of 98% for its subscription services. This statistic indicates a low attrition rate, where the annual contract value (ACV) from lost customers is minimal relative to total ACV from renewals. As of September 30, 2024, ServiceNow had approximately 2,020 customers with an ACV greater than $1 million, up from 1,772 customers in the previous year.

Metric	Q3 2024	Q3 2023	Change (%)
Renewal Rate	98%	98%	0%
Registered Community Members	500,000	450,000	11.1%
Training Sessions Conducted	10,000	8,500	17.6%
Customers with ACV > $1 Million	2,020	1,772	14.0%

ServiceNow, Inc. (NOW) - Business Model: Channels

Direct sales through internal teams

ServiceNow employs a robust internal sales force, which is integral to its direct sales strategy. In the third quarter of 2024, the company reported sales and marketing expenses of $944 million, an 18% increase from $799 million in the same period of 2023. This accounted for approximately 34% of total revenues. ServiceNow's sales team is focused on acquiring new customers and upselling to existing ones, leading to a total of 2,020 customers with an annual contract value (ACV) greater than $1 million as of September 30, 2024, up from 1,772 the previous year.

Managed service providers and resellers

ServiceNow collaborates with managed service providers (MSPs) and resellers to expand its reach in the market. The company has increased its investment in partner ecosystems, resulting in a $12 million increase in professional services and other revenues for the three months ended September 30, 2024, compared to the previous year. This strategy has been effective in enhancing customer value realization and driving additional revenue streams.

Online marketing and digital campaigns

Online marketing initiatives play a critical role in ServiceNow's customer acquisition strategy. In 2024, the company has ramped up digital marketing efforts, evidenced by a $21 million increase in expenses related to branding and marketing events for the three months ended September 30, 2024. These campaigns are designed to enhance brand visibility and attract new customers, contributing to an increase in subscription revenues of 23% year-over-year, totaling $2.715 billion for the third quarter of 2024.

Customer training sessions and workshops

ServiceNow emphasizes customer training and workshops as part of its value delivery channels. The company reported an increase of $10 million in professional services revenues, primarily driven by services and training provided to new and existing customers. These training sessions not only help customers maximize their use of ServiceNow's products but also foster long-term relationships, increasing customer retention and satisfaction.

Channel Type	Revenue Impact (Q3 2024)	Growth Rate	Customer Metrics
Direct Sales	$944 million	18%	2,020 customers with ACV > $1 million
Managed Service Providers	$12 million increase in professional services	N/A	N/A
Online Marketing	$21 million increase in marketing expenses	N/A	N/A
Training and Workshops	$10 million increase in services revenues	N/A	N/A

ServiceNow, Inc. (NOW) - Business Model: Customer Segments

Large enterprises across various sectors

ServiceNow serves a diverse range of large enterprises, with a significant focus on those with complex IT infrastructure needs. As of September 30, 2024, ServiceNow reported a total of 2,020 customers with annual contract value (ACV) greater than $1 million, an increase from 1,772 in the previous year.

The subscription revenue from these large enterprises was approximately $2,715 million for the three months ended September 30, 2024, marking a 23% increase compared to $2,216 million for the same period in 2023.

Government agencies and institutions

Government agencies represent a crucial customer segment for ServiceNow. The number of contracts with U.S. federal government entities has increased significantly, particularly in the number of 12-month agreements, driven by annual budget expenditures. ServiceNow's revenues from government agencies accounted for approximately 36% of total revenues for the three months ended September 30, 2024.

Furthermore, the company expects to recognize a substantial portion of its remaining performance obligations (RPO) from government contracts, which totaled $19.5 billion as of September 30, 2024.

IT departments in medium to large companies

ServiceNow's platform is particularly tailored for IT departments within medium to large organizations, facilitating streamlined IT service management processes. The revenues from IT Operations Management (ITOM) products grew by 24%, reaching $317 million for the three months ended September 30, 2024, compared to $255 million in the same period of 2023.

Overall, subscription revenues for ITOM products have shown consistent growth, indicating strong demand within this customer segment.

Industries focused on digital transformation

Industries undergoing digital transformation, such as healthcare, financial services, and telecommunications, are key targets for ServiceNow. The company's digital workflow products, which encompass a wide range of applications, generated $2,398 million in revenue for the three months ended September 30, 2024, up from $1,961 million in the prior year.

ServiceNow's focus on industries pursuing digital transformation reflects its commitment to fostering innovation and efficiency, with subscription revenues expected to remain robust as organizations increasingly adopt cloud-based solutions.

Customer Segment	Key Metrics	Revenue (Q3 2024)	Revenue Growth (%)
Large Enterprises	2,020 customers with ACV > $1M	$2,715 million	23%
Government Agencies	36% of total revenues	Included in total	Not specified
IT Departments	ITOM revenue: $317 million	$317 million	24%
Digital Transformation Industries	Digital workflow revenue: $2,398 million	$2,398 million	22%

ServiceNow, Inc. (NOW) - Business Model: Cost Structure

Personnel costs (salaries, benefits)

The personnel-related costs at ServiceNow, including salaries, benefits, bonuses, and stock-based compensation, have shown significant growth. For the three months ended September 30, 2024, personnel-related costs increased by $57 million compared to the same period in 2023, totaling $426 million. For the nine months ended September 30, 2024, these costs rose by $172 million, reaching $1.292 billion.

Operational costs for data centers

Operational costs associated with data centers, which include expenses for software maintenance and data center capacity, increased by $19 million for the three months ended September 30, 2024, and by $62 million for the nine months ended September 30, 2024. These costs are crucial for supporting the growth of subscription offerings and accommodating new customer requirements.

Type of Cost	Q3 2024 (Millions)	Q3 2023 (Millions)	9M 2024 (Millions)	9M 2023 (Millions)
Data Center Operations	19	—	62	—
Personnel-Related Costs	57	—	172	—

Marketing and sales expenditures

Marketing and sales expenses totaled $944 million for the three months ended September 30, 2024, compared to $799 million in the same period in 2023, reflecting an 18% increase. For the nine months ended September 30, 2024, these expenditures reached $2.827 billion, up from $2.454 billion in 2023, a 15% increase.

R&D investments for product innovation

Research and Development (R&D) expenses rose to $626 million for the three months ended September 30, 2024, compared to $549 million in 2023, a 14% increase. For the nine-month period, R&D expenses totaled $1.875 billion, marking a 20% increase from $1.562 billion in 2023. These investments are aimed at enhancing existing services and developing new applications to meet market demands.

Type of Expense	Q3 2024 (Millions)	Q3 2023 (Millions)	9M 2024 (Millions)	9M 2023 (Millions)
R&D Expenses	626	549	1,875	1,562
Sales and Marketing	944	799	2,827	2,454

ServiceNow, Inc. (NOW) - Business Model: Revenue Streams

Subscription fees for cloud services

In the third quarter of 2024, ServiceNow reported total subscription revenues of $2,715 million, representing a 23% increase from $2,216 million in the same period of 2023. For the nine months ended September 30, 2024, subscription revenues reached $7,780 million, up from $6,315 million in the previous year, also reflecting a 23% growth.

The subscription revenues are primarily derived from digital workflow products, which accounted for $2,398 million in Q3 2024, compared to $1,961 million in Q3 2023, marking a 22% increase. Additionally, IT Operations Management (ITOM) products generated $317 million in Q3 2024, up from $255 million, which is a 24% increase.

Professional services and training revenues

ServiceNow's professional services and other revenues increased to $82 million in Q3 2024, up from $72 million in Q3 2023, reflecting a 14% increase. For the nine months ended September 30, 2024, these revenues amounted to $247 million, compared to $219 million in the same period of 2023, showing a 13% increase.

This growth in professional services is attributed to enhanced training and services provided to both new and existing clients, which is expected to continue into 2024.

Licensing fees for software usage

ServiceNow recognizes a portion of its revenues from upfront fees associated with self-hosted software solutions. For the three months ended September 30, 2024, the company recognized $81 million from upfront fees related to self-hosted offerings, an increase from $67 million recognized in the same quarter of 2023. For the nine months, the recognized upfront fees grew to $275 million in 2024 from $210 million in 2023.

Upfront fees for self-hosted software solutions

Upfront fees from self-hosted solutions are a significant aspect of ServiceNow's revenue model. The company reported $275 million in upfront fees for self-hosted software during the first nine months of 2024, compared to $210 million in the same period of 2023. These fees are a key component of the subscription revenue, contributing to the overall revenue growth.

Revenue Stream	Q3 2024 ($ million)	Q3 2023 ($ million)	9M 2024 ($ million)	9M 2023 ($ million)	% Change (Q3)	% Change (9M)
Subscription Revenues	2,715	2,216	7,780	6,315	23%	23%
Professional Services	82	72	247	219	14%	13%
Upfront Fees (Self-hosted)	81	67	275	210	21%	31%

Article updated on 8 Nov 2024

Resources:

1. ServiceNow, Inc. (NOW) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of ServiceNow, Inc. (NOW)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View ServiceNow, Inc. (NOW)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.