- Bill McDermott, ServiceNow’s new CEO, has had a ringside seat to the “digital transformation” trend sweeping enterprise tech.
- He saw this trend and the rise of the cloud open up new opportunities for new tech giants like the one he just joined. And he witnessed the way it disrupted the business models of traditional tech behemoths, like SAP, which he led for nearly a decade.
- McDermott shares with Business Insider what he learned from the rise of the cloud, how it has changed the way businesses access technology, and how pouncing on the trend much sooner was the one misstep he wish he could take back.
- “We should have got there even faster,” he told Business Insider. “Having said that, you know, it’s better late than never.”
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For veteran tech executive Bill McDermott, “digital transformation” isn’t just another trendy catchphrase.
The new CEO of ServiceNow witnessed the trend’s rise as it created opportunities for new tech giants like the one he just joined, and disrupted older, traditional tech behemoths — like the one he just left.
McDermott was with SAP for 17 years, including nine years as CEO before stepping down to join ServiceNow just three months ago. He led the 48-year-old German tech giant at a time when it dominated the market for the software corporations used to run their businesses. And he watched that dominance shrink, battered by the rise of the cloud, which set the stage for the digital transformation wave.
McDermott has been widely-praised for leading SAP’s growth during a tough transition, but even he admits that he could have done a much better job identifying and quickly adapting to the cloud.
“I guess if you could point to anything that I would say, ‘Wow, I wish we could get that one back,’ it would probably be getting to the cloud even faster,” he told Business Insider.
McDermott’s insights into digital transformation in the cloud era are valuable at a time when businesses, including startups and big corporations, have come to understand technology’s importance in today’s world, but are navigating what has become a complicated, even confusing, enterprise tech market.
McDermott said he gets the dissatisfaction of many in the corporate world.
“One of the reasons why C-level executives are so frustrated or why digital transformation has become a slog instead of a sprint is because they are having a difficult time working through yesterday’s software to solve today’s problems,” he said. “20th century technology will not solve 21st century problems.”
Cloud Computing: How the cloud changed enterprise tech
The big changes began about 15 years ago with the rise of the cloud, which made it possible for businesses to explore new ways of using technology by letting them set up their networks on web-based platforms run by companies like Amazon, Microsoft and Google.
This meant companies could scale down or even abandon in-house data centers. The way they paid for software also changed dramatically. Instead of signing multi-year contracts featuring hefty licensing fees, they could pay a subscription fee for access to applications usually based on the number of users or the amount of computing they needed.
The magnitude of the change for traditional enterprise software players was summed up recently by Jennifer Morgan, one of SAP’s new co-CEOs who replaced McDermott.
“The cloud world is very different from a world when projects took years to implement and you can count on loyalty for decades,” she told Business Insider in a recent interview. “Now, it’s a game of days and weeks and months. And customers choose you every single day.”
Cloud Computing: ‘Cloud signals’
This trend was already developing in the early 2000s. Two companies that now dominate the cloud software arena were born around this time: Salesforce in 1999 and ServiceNow in 2003. But it took time for traditional business software makers, including SAP, to see what was going on, McDermott said.
“There were cloud signals that were flying around in the 2005 timeframe that were pretty evident,” he said. “And probably we should have got there even faster.”
The cloud trend gained momentum after the Great Recession of 2009, he said. With IT budgets getting slashed, companies were exploring options, especially those offered by cloud companies.
“That was the moment in time where the cloud really became the way forward,” McDermott said. “Companies did not have the money so there weren’t big capital expense budgets available. And they certainly didn’t have the time to essentially do quote unquote, the traditional big IT project.”
Cloud Computing: A dramatic market shift
For traditional enterprise tech companies, such as SAP, Oracle and IBM, this led to a dramatic market shift. “All of a sudden, the behavior of the buyer, or the company you were dealing with, became totally different, almost overnight,” McDermott said.
“Cloud just took off as the way forward,” he said.
Companies like SAP and Oracle eventually scrambled to catch up, mostly by acquiring existing cloud software players. McDermott quipped: “You know, it’s better late than never.”
The rise of the cloud formed the core of the digital transformation trend, although it also featured other new technologies, including AI, blockchain and Internet of Things.
Other trends have emerged, including a widening in the view toward cloud computing itself. One is hybrid cloud where businesses set up networks in cloud platforms, while keeping huge chunks of their data and applications in private data centers. Another way to look at is is multicloud, where companies set up their networks across different platforms.
Cloud Computing: No one-size fits all solution
Having more options has been positive for many businesses, but it has also made it tougher for others to make decisions on a range of issues: How much of their network should they move to the cloud? Which applications are best? Is it time to embrace AI?
“Digital transformation is different things to different people,” McDermott said. “The leading force within digital transformation is this idea of experience.”
For ServiceNow, which offers cloud tools to automate a business’s workflow and operations, focusing on experience means creating tools based on how employees do their jobs in different companies and industries. There is no one-size fits all solution, McDermott stressed.
He cited the example of businesses that hire millennials who he said “are not going to tolerate working in an office that doesn’t work with modern technology.”
“When they go to work, getting things done in the office has to be as simple as doing things on the living room couch on a Sunday afternoon,” McDermott said. “It just has to be.”
Employees in a specific industry may have different needs, he said. For example, most people who work at major airlines are minimum wage workers with a different attitude toward technology.
“Just think of taking minimum wage workers that may not have a systems literacy and the computer skills of a data scientist and you give them a complex 20th century experience,” he said. That will not work for employees for whom “the only thing they’re comfortable with is working on their mobile, and want a click twice and done experience” to do their job.
“It’s got to be simple,” he said. “We’re just in a different world here. And these are the things that really matter. Digital transformation with real customer value, real examples.”
Cloud Computing: A company born in the cloud
McDermott believes he is in a stronger position now to take on these challenges as CEO of ServiceNow, a company that was “born in the