ServiceNow Competitors Analysis

ServiceNow (NYSE: NOW) is a cloud-based IT service management platform. It offers many features and functions that help businesses streamline their digital workflow and improve efficiency. Fred Luddy founded the company in 2003 as Glidesoft, renamed it ServiceNow in 2006, and took it public in 2012 in an IPO that saw it raise $209.7 million. 

ServiceNow competes in the Cloud ITSM market. ITSM solutions focus on automating and managing an organization’s IT services. A study by MarketsandMarkets suggests that the global ITSM market will reach $12.2 billion by 2022, up from $4.7 billion in 2020. That’s a compounded annual growth rate (CAGR) of 21.2%. According to Gartner, ServiceNow had 51.1% of the global Experience Management: ITSM market share in 2019.

The above information shows that ServiceNow is a leading player in the ITSM market. It has solid financials, a large market share, and is experiencing strong growth. However, the company does face some competition from other vendors in the space. In this ServiceNow competitors analysis, I will look at some of their main competitors to better understand the competitive landscape.

Bottom Line Up Front

ServiceNow isn’t just a big player in the ITSM market; it’s the market leader. However, it does face some competition from other vendors, most notably BMC, Zendesk, Jira (Atlassian), Cherwell software, and Oracle. While its competitors may have different product offerings, they all ultimately provide similar solutions to help businesses automate and manage their IT services. One of ServiceNow’s primary advantages over its competitors is its market share, which gives it economies of scale and a strong brand.

List of ServiceNow Competitors

1. BMC
2. Zendesk
3. Jira (Atlassian)
4. Cherwell Software (Ivanti)
5. Oracle

ServiceNow Business Model and Competitive Strategies

ServiceNow is a Platform as a Service (PaaS) company. Its business model revolves around selling subscriptions to its cloud-based IT service management platform and offering professional services to help customers with implementation and customization. Although it has a diversified customer base, the company’s largest customers are in the technology, healthcare, and financial services industries.

About 95% of its revenues come from subscriptions, with the rest from professional services. Its gross margin as of June 30, 2022, was 77.53% and its operating margin was 3.30%. The company’s revenue has grown from $244 million in 2012 to $5.9 billion in 2021, a CAGR of 42.5% over that period. Given the size of the ITSM market and ServiceNow’s strong market share, there is still a lot of room for the company to grow its business. 

ServiceNow has adopted a land-and-expand strategy with its customers. Once it gets its foot in the door with an organization, it looks to upsell them on additional features and functionality. According to the company, it claims 42% of the 2000 largest companies as customers. Better yet, it has a customer retention rate of 97% and a renewal rate of 98%.

The company has made several acquisitions over the years to help it expand its product offerings and address new markets. Some of its notable acquisitions include Element AI (Nov 2020) for $500 million, Neebula (July 2014) for $100 million, and Loom Systems (Jan 2020) for $58 million. In June 2021, the company announced plans to acquire Hitch Works for an undisclosed amount.

ServiceNow’s main competitive advantages are its scale, market share, customer retention rates, and continuous innovation. The company strongly focuses on research and development (R&D), where it spends about 20% of its operational expenses. In 2021, it spent $1.397 million, up from $1.024 million in 2020.

ServiceNow Competitors Analysis

Competing in the cloud-based IT service management market requires a robust platform, economies of scale, and continuous innovation. ServiceNow has all three of these things. However, the company does face some competition from other vendors in the space, most notably BMC, Cherwell, Jira, Zendesk, and Oracle.

Below is a detailed analysis of each of ServiceNow’s main competitors: 

1. BMC

Founded in 1980, BMC is an American multinational corporation that provides enterprise software solutions. The company offers a comprehensive portfolio of IT solutions, including ITSM, digital experience management, security operations, and mainframe solutions. BMC’s approach to IT management is based on the concept of Digital Enterprise Management (DEM), which integrates software, automation, and analytics to help organizations manage their digital transformation journeys.

BMC hasn’t always been a private company. In 2013, a consortium of private equity firms, including Golden Gate Capital and Bain Capital, took the company private in a $6.9 billion leveraged buyout. Later in 2018, KKR, a leading global investment firm, acquired BMC in an undisclosed all-cash deal. The company has about 6,000 employees and operates in over 50 countries. 

The main difference between BMC and ServiceNow is that BMC is a SaaS provider, and ServiceNow is a PaaS provider. As a result, BMC’s solutions are more focused on software development and deployment, while ServiceNow’s solutions are more focused on service management. With BMC’s PaaS framework, customers can develop and deploy custom applications on top of the BMC platform directly from the cloud. 

However, both companies provide similar solutions for ITSM, ITOM, ITBM, and security operations. BMC’s main selling points are its comprehensive product portfolio, global reach, and partnerships with leading technology vendors. Since its founding, the company has made 25 acquisitions, spending over $2.7 billion. Some of its notable acquisitions include Remedy Corp (2002), CorreLog (2018), and BladeLogic (2008).

I believe that, as a whole, ServiceNow is a more comprehensive and innovative company than BMC. ServiceNow’s stronger focus on R&D and customer success continue to give it a competitive edge in the marketplace. Moreover, it has a solid financial standpoint, with more revenues, higher margins, and a relatively long operating history. In 2021 BMC reportedly made $2.1 billion in annual revenues. 

See also: Teladoc Competitors Analysis

2. Zendesk

Zendesk is an American customer service software company based in San Francisco, California. In 2007, three Danish entrepreneurs – Mikkel Svane, Morten Primdahl, and Alexander Aghassipour – founded the company intending to provide a better customer service experience. Initially, the adoption of Zendesk was primarily through word of mouth. Startups and small businesses were the company’s main target market.

Over time, Zendesk grew its customer base and expanded its product offerings. In 2014, it acquired a live chat software company called Zopim for $29.8 million. It went public in 2014, and by August 20, 2022, it had a market cap of $9.449 billion. Lately, Zendesk hasn’t been doing too well. In February 2022, the company declined a $17 billion acquisition offer from Jana Partners, claiming it was worth more. 

Moreover, its investors turned down an offer to buy the parent company of SurveyMonkey, Momentive. Earlier in June 2022, the company resorted to remaining independent, which caused its stock price to drop. However, later that month, it settled for a $10.2 billion acquisition deal from an investor group led by Permira, Hellman, and Friedman. This deal was far less than its original ask of $17 billion; however, analysts believe it was the best decision given the prevailing market conditions.

I can’t say Zendesk is a direct competitor of ServiceNow, as Zendesk’s primary focus is on providing customer service software, while ServiceNow provides a much broader range of enterprise IT services. However, both companies operate as cloud-based software-as-a-service (SaaS) providers and offer similar automation, workflow, and analytics solutions. 

In terms of market share, ServiceNow is the clear leader; however, Zendesk is growing at a much faster rate. I believe ServiceNow is a better option for investors seeking exposure to the cloud-based enterprise software market. While ServiceNow has better financials, Zendesk doesn’t lag too far behind, and its faster growth makes it an intriguing option. In 2021, Zendesk had $1.339 billion, up 30% from the previous year, while ServiceNow had $5.896 billion in revenue, up 30.47% from 2020.

3. Jira, Atlassian

Jira is a software development tool used for issue tracking and project management. As a proprietary issue-tracking system developed by Atlassian, Jira is mainly used for enterprise planning and tracking in software development. Its key features include agile reporting, workflow customization, multiple project support, time-tracking integration, and customizable dashboards.

Jira was first released in February 2002. Back then, it was primarily an issue-tracking tool for software developers. Later non-IT and business teams began using it for project management. As a product of Atlassian, which is an Australian company, Jira is marketed and sold internationally. In 2021, Atlassian’s annual revenue was $2.089 billion, up from $1.614 billion in 2020, an increase of 29.42%. 

The level of competition between ServiceNow and Jira depends on how you define the market. They’re direct competitors if we consider them both as workflow management software. If we consider them both as issue tracking software, then they’re still competitors, but the level of competition is lower. ServiceNow is more of an IT management software, while Jira focuses on issue tracking for software development. 

However, both have features that help streamline workflows and boost productivity. Jira’s main competitive advantage lies in its simplicity and user-friendliness. Anyone can use it without training, and it’s easy to customize. Moreover, its integration with other Atlassian products makes it even more powerful. Like ServiceNow, Jira offers a one-stop shop for all your development needs, including project management, automation services, IT support, etc. 

ServiceNow, on the other hand, has a more comprehensive set of features and is better suited for larger enterprises. It’s more expensive than Jira, but its features justify the price. If we consider them workflow management software, ServiceNow is the better option for investors. However, if we consider them both as issue tracking software, Jira is a more attractive option given its faster growth and lower price.

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4. Oracle

Oracle is a multinational computer technology corporation headquartered in Redwood Shores, California. The company specializes in developing and marketing database software and technology, cloud-engineered systems, and enterprise software products — particularly its relational database management systems brands.

Larry Elison founded Oracle Corporation in 1977 with Bob Miner and Ed Oates. The company went public in 1986 with an initial IPO (IPO) of $15 per share. Ellison, Miner, and Oates each owned about 25% of the company at the time of the IPO. Today, Oracle is one of the largest software companies in the world, with a market capitalization of $209.623 billion as of August 20, 2022. In 2021, Oracle’s annual revenue was $11.84 billion, up from $11.227 billion in 2020, an increase of 5%. 

ServiceNow and Oracle compete in the enterprise software market. Oracle offers a suite of products that ServiceNow doesn’t, including database management systems, cloud services, and enterprise resource planning (ERP) software. However, ServiceNow is a more comprehensive IT management platform, offering features that Oracle doesn’t, such as ITSM and CSM. 

Both companies also offer automation and workflow management solutions. However, ServiceNow’s solutions are more robust and comprehensive. Oracle’s main competitive advantage is its experience; the company has been in business for over four decades and is a trusted name in enterprise software. Moreover, Oracle’s suite of products is attractive to businesses that want to consolidate their vendors and reduce costs. 

When looking to invest in either company, it’s essential to consider the different products they offer and how they fit into your portfolio. Oracle is a good option if you’re looking for an enterprise software company that offers a comprehensive suite of products. However, ServiceNow is better if you’re specifically looking for IT management software or workflow management solutions.

5. Cherwell Software

Cherwell Software is a privately held company that specializes in ITSM software. The company was founded in 2004 and has its headquarters in Colorado Springs, Colorado. Cherwell’s main product is its ITSM software, the Cherwell Service Management Platform. The company also offers various products and services, including asset management, change management, customer service management, and IT operations management. 

Over the years, the company has gone through several funding rounds, raising $259.2 million. In March 2021, Ivanti, an enterprise software company, acquired Cherwell to expand its ITSM capabilities and accelerate innovation in unified endpoint management and digital workspace solutions. Ivanti didn’t disclose the financial terms of the deal. 

Cherwell competes with ServiceNow in the ITSM software market. Both companies offer similar products and services, including asset management, change management, customer service management, and IT operations management. Cherwell’s competitive advantages lie in its lower prices and flexibility; the company offers both on-premises and cloud-based deployment options. 

Financially, Cherwell is a much smaller company than ServiceNow. Although it doesn’t disclose its financials, Ivanti’s CEO stated in 2020 that the company had grown from annual revenue of $40 million to $5 billion within five years. If $5 billion was Ivanti’s revenue in 2020, then in 2021 post-acquisition, I expect a relatively flat year for Cherwell. 

Cherwell is an attractive option for investors looking for a small-cap stock with good growth potential. But because it’s a subsidiary of Ivanti, it doesn’t have the same level of independence as ServiceNow. We believe ServiceNow is the better option for investors looking to dip their toes into the ITSM software market. 

See also: Coca-Cola Business History: A Look at the Past, Present, and Future

ServiceNow SWOT Analysis

Below are the Strengths, Weaknesses, Opportunities, and Threats (SWOT) of ServiceNow: 

Strengths

• Comprehensive IT management platform
• Strong financials
• A trusted name in enterprise software
• First mover advantage

Weaknesses

• Depending on the North American market
• High prices
• Depending on large enterprise 

Opportunities

• Global growth potential in the IT management software market
• Attractive acquisition target
• New product development

Threats

• Competitive pressure from larger enterprise software companies
• Technology becoming obsolete
• Cybersecurity threats
• Cannibalization of existing product line by new products

ServiceNow Competitors Analysis (FAQs)

Conclusion

The ITSM software market is highly competitive, with several large players vying for market share. ServiceNow is a leading player in the industry, with a comprehensive IT management platform and strong financials. It has a relatively high price point, but its product offerings and deployment options are flexible, which is a crucial selling point for customers. With a historical CAGR of 42.5% from 2012 to 2021. I believe ServiceNow is a good option for investors looking into the ITSM software market. 

BCM stands out as its largest and most well-known competitor, with a long history in the market and comprehensive product offerings. Among the other leading competitors, Zendesk is a customer service management solution that doesn’t offer the same comprehensive IT management capabilities as ServiceNow.

Jira is an issue tracking software from Atlassian that also lacks some key features of ServiceNow’s platform. Oracle’s enterprise software offerings are much broader than just ITSM, and Cherwell is a minor player that Ivanti acquired in 2020. 

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John Hughes

John Hughes is a seasoned expert in digital marketing strategy, business model analysis, and financial insights. Possessing a robust background in finance, his expertise extends into deciphering complex business models, conducting comprehensive SWOT analyses, and staying attuned to the latest market trends.

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