ServiceNow, Inc. (NOW, Financial) is a cloud based platform that allows customers to streamline workloads within different verticals of the organization. Originally, the company offered solutions that streamline workflows within the IT Service Management (ITSM), but continuously expanded its offering to other verticals like IT Operation Management (ITOM), Customer Service, Security, HR, Financials and Platform As A Service (PaaS). During 2015, the company was going through internal and external reorganization processes that impacted the internal sales organization and shifted a portion of NOW’s business towards its partners. Though these changes in the company are expected, as the company grows beyond $1 billion in sales, it had a negative impact on billings growth. We believed that the market misunderstood the billings update, its limited long-term impact and added to our position. After better than expected Q1, the stock reacted positively, and we expect a strong year as the sales organization stabilizes. We believe the company is taking the right steps to allow itself to continue its longterm growth towards management’s $4 billion revenue goal, as it expands beyond its original ITSM market and invests in its ecosystem of system integrators, distributors and developers.
From Baron Opportunity Fund first quarter 2016 commentary.
