ServiceNow president leaves after policy breach related to public sector boss hire

ServiceNow has parted ways with president and chief operating officer Chirantan "CJ" Desai after an internal investigation found he had violated company policy when hiring the former CIO of the US Army as the workflow vendor's public sector boss.

News of Desai's departure emerged in a regulatory filing whose primary purpose was to announce the company's Q2 2024 results.

Those results were strong: revenue of $2.6 billion represented 22 percent year-over-year growth. Some $2.55 billion of that revenue came from subscriptions, and ServiceNow can see $18.6 billion in future subscription revenue. Net income of $262 million, measured using GAAP principles, was down from the $1.04 billion recorded for the same quarter in 2023 - but that result was inflated by $910 million tax benefit. The business has therefore improved its profit performance.

On the earnings call, chair and CEO Bill McDermott didn't dive into the numbers, instead discussing Desai's departure.

The CEO explained that the process began with an internal complaint, detailed in a March filing, regarding potential compliance issues during the procurement process for a government contract.

ServiceNow's board considered the matter with the help of outside counsel. That investigation "determined that our company policy was violated." The individual who was hired - identified in an old press release as Dr Raj Iyer - has left the company.

Desai and ServiceNow "came to a mutual agreement that Desai would resign from all positions with the company effective immediately."

ServiceNow believes this was as "an isolated incident" and that its executive team can cover for the loss of both men.

As the dust settles, former chief digital information officer and chief customer officer Chris Bedi will step in as chief product officer.

With that unpleasantness behind him, McDermott reeled off plenty of better news - including six new million-dollar clients, a US federal government customer spending $100 million over its entire engagement, and Boomi booting a competitor to go all-in on ServiceNow. The London Stock Exchange moved 15 siloed platforms and 14 lines of business to ServiceNow.

The SaaS vendor's NowAssist generative AI chatbot is apparently finding favor with customers, and ServiceNow's dogfooding efforts have saved "45 minutes per avoided case." Dell will use it for customer and employee service, and eleven customers signed million-dollar deals for the tool across the quarter.

McDermott pitched ServiceNow as a rare example of generative AI delivering a tangible benefit, and suggested its platform will become a model for the way businesses implement AI across their operations.

Financial analysts on the earnings call seemed to think that's a reasonable prediction, and focused their questions on the process of selling AI to buyers amid the endless hype on the subject.

"I think what's happened is they've heard so many whitewashed AI stories from pretenders that they are a little jaded," McDermott admitted, adding that once ServiceNow shows them demos, and customer references, prospects perceive the product as something real. And then they sign up to buy it.

McDermott was also able to tell investors that ServiceNow was untouched by the CrowdStrike mess, and that its configuration management database tools helped its users to identify their own issues and bounce back faster.

Investors were offered guidance for Q3 of $2.66 billion to $2.665 billion revenue - representing more than 20 percent year on year growth. Markets liked what they heard: ServiceNow's share price opened at $755, drifted down to $730.45 late in the day, then bounded to over $780 in after-hours trading. ®