San Diego’s ServiceNow Driving Hard as Revenue Soars; Expands to Silicon Valley

8/9/11Follow @bvbigelow

[Updated 8/9/11, 7:20 am. See below.] ServiceNow co-founder Fred Luddy told me in January that the San Diego-based provider of Web-based IT management services was on a fast-growth track, and he saw a “clear path” to $1 billion in annual revenue. I wouldn’t say it looked clear to me then, but the company’s trajectory is becoming more apparent today.

ServiceNow, which has been on a hiring binge, says it is opening a new office in San Jose—calling it the company’s “long overdue debut” in Silicon Valley—and the opportunity to tap into the Bay Area’s deep bench in cloud computing.

Founded in 2003 (when it was known as Service-Now, with a hyphen) ServiceNow went cash flow positive in 2007 on annual revenue of $13 million. Luddy told me the company had 275 employees in January. The headcount was 310 three months later, when ServiceNow named former Data Domain CEO Frank Slootman to head the company.

In announcing the opening of its first Silicon Valley office, Slootman says ServiceNow has hired 130 new employees in the past 90 days. The company’s global headcount is now a little more than 400 employees, and that number is expected to grow to more than 500 by the end of September.

The company also named Moti Eliav as vice president of platform development. He will be based in the new San Jose office (in the Metro Plaza business park), and plans to triple the size of ServiceNow’s platform development team in the next year. Slootman describes the new San Jose office as “a kind of mini-hub to San Diego,” which will include Eliav’s team, sales, and operations staffers. By the end of the year, he expects ServiceNow will employ more than 50 people in San Jose.

Slootman, now in his fourth month as ServiceNow’s CEO, tells me that a fast-growth business can’t grow piecemeal. Sounding a bit like Bobby Allison at Daytona, Slootman suggested the company hadn’t “stepped on the pedal quick enough or hard enough” before he took over. Hiring at high speed requires fortitude. “It’s like looking at the rear-view mirror,” Slootman says. “Objects are closer than they appear. We are sort of stepping on the pedal here.”

ServiceNow provides its IT management software, including help desk functions, in software-as-a-service style. By hosting the software on its own servers instead of installing it on a customer’s intranet, ServiceNow helps customers outsource their information technology and pay a flat monthly subscription fee.

The company now claims almost 800 enterprise customers, including San Diego-based Qualcomm; Milpitas, CA-based SanDisk; Troy, MI-based Delphi; Chelmsford, MA-based Kronos; Seattle, WA-based Real Networks; and Columbia University in the City of New York.

Revenue also has been accelerating for the venture-backed company, which has raised a total of $7.5 million from JMI Equity. ServiceNow says its annual recurring revenue passed $125 million in the fiscal year that just ended June 30, and its recurring revenue has more than doubled since June 30, 2010, when the company was at roughly $62 million in annual recurring revenue.

“It’s a record quarter by a mile,” Slootman says, “It’s by far the strongest quarter the company has experienced in its history.”

[Updated 8/9/11, 7:20 am to distinguish calendar year revenue.] When Luddy told me in January the company had generated $86 million in 2010, he was referring to ServiceNow revenue for the year that had just ended in December.

Despite the markets’ recent volatile gyrations, Slootman says the company also remains on course for an initial public offering. “We’re aiming to be IPO-ready after the first of the year,” he says. “That doesn’t mean we are going to go out. It just means we’ll be ready to go out.”

He also was unperturbed by the day’s market plunge. Regardless of the macro-economic trends, “The market is dying for companies like ServiceNow that are dynamic, growing, and fresh,” Slootman says. With revenue growing rapidly, there is no imperative for ServiceNow to raise capital by going public. “Our IPO will be a branding event and a liquidity event, rather than a fund-raising event,” Slootman says. “We’re not in a cash pinch.”

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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