Service-Now CEO Fred Luddy Sees a Clear Path to $1 Billion in Annual Revenue

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using us for several hundred employees, and it’s grown to several thousand in four years,” Luddy says. “We’re very proud of the fact that companies like Intel, Google, and Facebook are using Service-now.”

The company itself also has grown. Service-now’s headcount is about 275 today, with about 150 working in the San Diego headquarters, and the rest in Chicago, New York, Atlanta, London, and Frankfurt. Another 150 to 200 are consultants with partner companies like Accenture who are only working with Service-now customers.

“I honestly think the recurring revenue model is the eighth wonder of the world—every quarter it builds,” Luddy says. The company went from annual revenue of $850,000 in the first year to $13 million in 2007, when Service-now first went cash flow positive. Service-now generated $86 million in 2010.

Service-now’s strong growth means that the company, which has raised a total of just $7.5 million in venture capital, has not had to return to JMI Equity for more funding.

It also suggests that Service-now has sufficient momentum to carry the company through an IPO, which Luddy confirms is a topic the board has discussed. “We’ll certainly entertain that notion as we blow past $100 million in annual revenue, with high operating margins and EBIDA [earnings before interest, depreciation, and amortization] to report to Wall Street.” (Luddy says several companies “with two or three letters in their name” also have inquired about the prospects of acquiring Service-now.)

The company has no need for cash, Luddy says, and an IPO “would be something we do for our employees’ liquidity and our shareholders.” After that, Luddy says, “We would absolutely aspire to be the next Qualcomm in San Diego… We do aspire to become a billion-dollar [annual] revenue company over the next five years.”

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Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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