Service-Now Names Software Industry Veteran Frank Slootman as CEO

4/26/11Follow @bvbigelow

When I met in January with Service-now.com founding CEO Fred Luddy, he said the company that provides software-as-a-service for IT management has enough momentum to carry it through an IPO. Today, if I’m reading the tea leaves correctly, the San Diego company took an important preliminary step in that process by naming Bay Area software industry veteran Frank Slootman as CEO.

Slootman, who was born and educated in Holland, was previously the CEO of Data Domain, the data backup company founded in 2001 with backing from Greylock Partners.

Slootman joined Santa Clara, CA-based Data Domain in 2003 and headed the company through a period of extraordinary growth, which included its 2007 IPO on NASDAQ as well as its acquisition by EMC for $2.4 billion in 2009. (Hopkinton, MA-based EMC topped NetApp in a fierce but short bidding war for Data Domain.) Following the EMC buyout, Slootman remained at Data Domain for 18 months as the company integrated its operations with EMC, forming what is now EMC’s backup recovery systems division.

In January, Slootman joined Greylock’s Menlo Park, CA, office as a partner. He plans to continue his long-time affiliation with both Greylock and EMC. He told me this morning he plans to move to San Diego, and for what it’s worth, that Service-now plans to keep its global headquarters here.

Frank Slootman

Before joining Data Domain, Slootman focused on application development and infrastructure products as a senior vice president of products operations at Borland Software. He also spent seven years at Compuware as general manager of UNIFACE in Amsterdam and as general manager of the EcoSystems division in Campbell, CA.

Today, his expertise includes enterprise infrastructure and software, which is the focus of the Web-based platform that Luddy developed at San Diego’s Service-now.com. Luddy, who founded Service-now.com after leaving Peregrine Systems in 2002, will guide the company’s product strategy and evolution as chief product officer.

Service-now generated $86 million in revenue last year, and Luddy says the company just passed the $100 million mark in terms of contracts for this year. “We’re currently growing at about 18 percent a quarter, which puts the company on a path to double every year for the foreseeable future,” Luddy says. So in Luddy’s mind, it’s not a question of product readiness or market readiness. Service-now has demonstrated that the market already exists for providing Web-based services that help the 2,000 biggest companies in the world manage their far-flung IT needs.

Luddy has done it before, as the chief technology officer at Peregrine, which installed enterprise software for IT management and was on its own fast-growth trajectory in the late 1990s. That trajectory turned out to be illusory, however. Peregrine was overwhelmed by a corporate accounting scandal that became exposed in the recessionary months that came after the Sept. 11 terrorist attacks. It was eventually acquired by Hewlett Packard, following a searing Chapter 11 bankruptcy reorganization.

Luddy, who told me he aspires to make Service-now San Diego’s next Qualcomm, said in January the company has no need for additional cash. If it goes public, he said it would likely happen as a “liquidity event” for the benefit of its employees’ and shareholders’ liquidity.

Service-now raised a total of just $7.5 million in venture capital—all from JMI Equity, the private equity firm based in San Diego and Baltimore, MD, and Luddy says the company has been cash-flow positive since 2007. (Sequoia Capital acquired a stake through founders shares in the company at the end of 2009.) Today, Slootman calls Service-now’s growth so far “nothing short of amazing,” yet he adds that most of the company’s opportunity for global growth remains before it.

Service-now currently generates about 25 percent of its revenue outside the United States, and Luddy says the company believes it can grow to be on par with other major technology companies, such as IBM and HP, that generate 40 to 60 percent of their revenue outside the U.S.

“What I thought was most important was to build the company around operational excellence,” Luddy says. “And if you read the story of Data Domain, that’s exactly what Frank did in growing that company from a startup to more than 1,000 employees.”

A key factor that Slootman cited in managing that kind of fast growth is rapidly increasing Service-now’s workforce, which currently totals about 310. About 150 of those employees work in the company’s San Diego headquarters. “The thing about an enterprise software company is that it’s a ground war,” Slootman says. “It’s door-to-door fighting, and not just by the sales team. It’s the entire company.”

Recruiting, training, and bringing new employees onboard through all the functions of a company’s operations is a painful process that Slootman compares to building the runway just as the plane is coming in for a landing. Throw in all that door-to-door fighting, and it’s a mixed metaphor—albeit a vivid one—that describes the challenges ahead for Service-now.

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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  • B Webb

    Hey Fred…sounds like you have the management to make me successful now? When can I come back?

  • Concerned

    Is Fred Healty? Should customers be worried