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Data Sheet—Friday, January 16, 2015

Good morning, Data Sheet readers. The Internet of things is Intel’s fastest growing line of revenue. One of the fathers of the Apple iPod is now in charge of Google Glass. Plus, ServiceNow thinks your company’s service could be better. Read on for an exclusive interview with CEO Frank Slootman.

I’ll be honoring Martin Luther King, Jr. Day this weekend. Back Tuesday morning with your next edition.

If you find this newsletter useful, forward it to colleagues and business partners, and tell them to sign up! Did you miss one? Here’s an archive of past editions.

TRENDING

Google Glass goes into stealth. The development team behind the smart eyeglasses project was officially “graduated” out of GoogleX and placed under the tender loving care of Tony Fadell. He’s the Apple iPod designer who went on to create smart thermostat maker Nest. (Bought by Google for $3 billion one year ago). Accordingly, there has been rampant speculation that the wearables technology is doomed (doomed!) Personally, I think it’s a signal Google is ready to commercialize the product. Even though it vastly underestimated the consumer appeal, it may have vastly underestimated commercial, industrial and medical applications. Wired

Good news, bad news for Intel. The chip giant handily beat analysts’ estimates for its fourth quarter. Income was up 39%, in large part due to its technology for servers and data center equipment. Its fastest growing business: the Internet of things division, which rose 19% to $2.1 billion. Plus, it topped CEO Brian Krzanich’s goal of shipping 40 million chips for tablets in 2014. (It managed 46 million.) And yet, overall revenue projections for this year aren’t as strong as anticipated. What’s more, it’s still losing money on its mobile device business. New York Times

Yahoo shuffles ad team. The chief product officer from the mobile marketing startup it bought last year, Flurry, is now in charge. Prashant Fuloria will report directly to Yahoo CEO Marissa Mayer. He replaces the guy who orchestrated the acquisition (estimated around $240 million) in the first place. The company isn’t commenting. Wall Street Journal

Amazon’s E.U. tax problem. The commission is trying to dismantle the e-commerce giant’s sweetheart deal with Luxembourg because it messes with the notion of a single-market Europe. What’s this: The guy who originally approved the arrangement is now in charge of European Commission legislation? That should make things real interesting. Fortune

Athenahealth’s buying binge. Bubble, what bubble? The controversial medical records software company just paid an “immaterial amount” (less than $268 million) to buy RazorInsights, which sells administrative software for hospitals. Fortune

POLICY & STRATEGY

It takes a village. Microsoft is dispensing free cybersecurity advice to municipal governments that are part of the Rockefeller Foundation’s 100 Resilient Cities initiative. Because connecting with citizens via mobile apps, intelligent lighting networks, and other smart city applications is great in theory—but it’s a recipe for next-generation breaches. Wired

RESEARCH & PREDICTIONS

Record funding for Internet startups. Overall, would-be disruptors using technology as their not-so-secret weapon raised $11.9 billion in 2014—up 68% from the prior year. Yes, consumer-centric, ride-sharing play Uber was behind the biggest round ($1.2 billion). But Magic Leap, a software company working on augmented reality technology, also got attention with its $542 million from Google, Qualcomm Ventures, and several other investors. Computerworld

 

STARTUPS & DISRUPTORS

$15 million more for big data as a service. Treasure Data manages everything from collection to analysis for customers like Equifax with a cloud-based offering similar to those from Altiscale ($30 million last December) and Qubole ($13million more in the same month). Its Series B round led by Scale Venture Partners puts total funding for the three-year-old company at $23 million compared with $42 million and $20 million, respectively. Gigaom

Supply-chain software company shops self. E2open’s earnings are flagging despite high-profile customers like IBM, Cisco and L’Oreal S.A. It’s seeking a buyer, as is rival GT Nexus. WSJ

Instant infographics. Neo Technology’s database technology shows relationships between metrics with graphs not numbers. Declared clients include Walmart and eBay. It just raised $20 million in Series C financing from investors led by Creandum and Dawn Capital. Gigaom

FAQ

Could your service be better? ServiceNow has an answer

Back in mid-2012, ServiceNow earned the dubious distinction of being the first business technology startup to go public after the disappointing Facebook IPO.

To the gratification of investors, it had no problem blowing through an anticipated $2 billion market capitalization by ending its debut day up 37% over the initial pricing range.

These days, the cloud service management software company is worth close to $9.7 billion. Its technology has found converts among 2,500-plus businesses eager to optimize processes for everything from help desk management to facilities or human resources requests. Big accounts include Swiss Re, Enterprise Rent-A-Car, Flextronics, and Kimberly-Clark.

The company’s next earnings report (for the year ended December 2014) is due out on Jan. 28. Analysts are calling for revenue of around $678 million—by the end of 2015, sales should be close to $950 million.

What’s up for the year ahead? President and CEO Frank Slootman took over from ServiceNow founder Fred Luddy in 2011 after selling his previous company (Data Domain) to EMC and dipping his toe into venture capital. He spoke with Fortune on Jan. 6 about why the concept of service management is catching on outside IT departments. Excerpts were edited for length and clarity.

Define service management, especially for the non-IT person.

If you call a service provider with an issue, whether you want something or you have a problem where you need information, people start scurrying around and trying to deal with your issue. You get that when you talk to human resources or facilities—you’ve lost your badge or you want to change your 401(k) allocations. It’s a very people-based business, but essentially what happens is that there’s a huge amount of work. People are very, very busy.

What makes service deliverable management “manageable” is when it’s considered through a structured defined approach. Instead of you just calling up and saying, “Hey, I have a problem,” we structure that request, we structure that workflow. All those events are aggregated as alerts. [Using ServiceNow] I can put them in a database, and I can report on it, I can add analytics. I can break these alerts down in every category so I know what we’re working on, and how well we’re doing on it. That just changes everything.

Our customers are always like, “God, I had no idea HR people were spending a third of their time on benefits problems.” That’s because there is no visibility. The whole service process is completely opaque. You can’t manage what’s opaque, so you need to create a structure that allows the whole process to become transparent so people can see what we’re working on, how well we’re doing. …

So now we’re getting proactive. That’s the management dimension. As opposed to me just chasing my tail and solving problems, now I’m going after the underlying sources of all these tickets coming in, coming over the transom. I’m going to eliminate what’s driving all that work into my organization. That’s what management is about, as opposed to just chipping away at the volume of work that’s coming in. …

E-mail has become sort of the universal go-to [for handling this] because we don’t have structured processes and workflows to do this sort of thing. That’s really the big change, where we’re going away from unstructured message-based communications to structured workflow approaches that make everybody look at the same data in a very structured, transparent fashion. There’s no longer any need to send emails because the information will be right in front of your nose.

The IT department is still central in this mission, right?

IT is a very service-intensive business. It has a fine appreciation for the service model because [it often is] just deluged by work, and that didn’t make IT very popular within the employee population. Service management became a survival strategy; IT had to find ways to deliver services in a different way than the way HR, facilities or purchasing teams—or anybody else in the business.

IT people are technology-savvy, of course, so they understood and appreciated much better than an HR organization or sales organization what technology can really do to change things. They understand process, they understand structured approaches to things, they understand databases, they understand record definitions. That’s why this discipline really fell into fertile ground in the world of IT.

[For us], IT is also the organization that brings the notion of service management to the broader enterprise. They are not just the end user of this approach, these techniques and these systems. They’re also the people advocating and championing how service management works across the broader enterprise. The IT team is not just our customer, it is our partner in terms of approaching the broader enterprise, which is a very unique thing. About two-thirds of our business still is very much focused on IT internal service management. But I’ll tell you what—a couple years ago, that would’ve been almost 99%, so our influence is very, very rapidly growing into these other functional areas. …

IT is at a crossroads because a lot infrastructure operations responsibilities are moving into the cloud—no longer their problem, other than that they have to procure it, and from the transactional standpoint of managing the service relationship, that’s still their job. But a lot of the infrastructure work is not IT’s issue anymore. A lot of the application responsibilities are at least in part moving into the line of business. So, IT is at a point where it is redefining and reinventing itself for a completely new role in the enterprise. A lot of that has to do with how we work and how we manage service.

Can you give me a customer example?

We have retail customers that use ServiceNow for supply chain management. We have some very large retail customers who essentially have been communicating with e-mail and spreadsheets with all their stores and distribution centers on a continuous basis. You know, they need drills and saws in a particular store at a particular time, at a particular price. They don’t have them and some other store has them or distribution center has them, so everybody is constantly rebalancing and moving products to the right place at the right time. That’s how retailers make money: supply chain optimization is the difference between making money and not making money, it’s really important.

Typically, these processes run through e-mail and everybody maintains their own little database, like a spreadsheet or whatever other tool they use to keep track of all their requests and the status and so on. These tasks are analogous to what goes on in service management. They need total visibility, right? Which stores, what products? Service management lets companies start to pinpoint the problems in the supply chain, and how they can proactively go after them.

What differentiates your approach from legacy companies? 

That actually goes to the heart of why we even exist as a company. Our founder, Fred Luddy, back in 2003 was inspired by brand-new consumer products like Yahoo and Google. Both Yahoo! and Google had approached us to do software, where people without any training or documentation were able to define their own custom homepages, right? You just selected things off of lists, you’d check boxes, and then poof, the page just set itself up to your own unique needs and preferences.

And Fred was like, “Man, you know, enterprise software could be that way, completely declarative, no programming, no training, no documentation.” That would be an enormous thing, because you would basically increase the number of people that could use your software by orders of magnitude. Instead of having extremely arcane technical demanding skills needed to use your software, all of a sudden everybody with moderate skills could become a user of your platform. …

Our type of applications could be built before. But they were very, very demanding for the people doing it, and it was expensive and it was slow. They were very difficult to change, and that’s a huge problem. This whole notion of agility is very important in the world of business. People want to make changes to workflows, to the analytics, they want to make changes to the data structures literally on a daily basis. That used to be a once-a-year occurrence, because it was so difficult and risky and painful that the tools limited the amount of change that companies could process. Now it’s just happening in front of your eyes.

That’s what ServiceNow brought. We just massively lowered the bar, allowing orders of magnitude of more people to be productive on the platform. Then there’s this notion of abstraction and agility. Abstraction just means that you don’t have to know as much, but agility means that I can change everything about this application right in front of your eyes in real time. And that’s intoxicating.

What’s your top priority for 2015?

2015 is not that different from 2014, there’s only one goal that we have. Our mission is to basically drop the ‘IT’ from service management discussions. Instead of having people talking about IT service management, we just want them talking about service management, the implication being that it’s an enterprise discipline.

We believe that if we’re successful, service management will be as common as ERP and CRM and all the other alphabet soup applications that you’re familiar with. It’s just something that we have. It’s part of our infrastructure. We can’t even imagine a world without it. That’s our fundamental goal and mission.

MY FORTUNE.COM BOOKMARKS

Will big data help end discrimination—or make it worse? By Katherine Noyes

How to build a startup that changes the world: don’t overthink it By Adam Lashinsky

Companies are still struggling to implement Obamacare By Laura Lorenzetti

Movie studios are banking on an Oscar bump By Tom Huddleston, Jr.

The 23 Fortune 500 companies with all-male boards By Caroline Fairchild

 

FOR YOUR INNER TECHNOPHILE

Elon Musk: Keep artificial intelligence safe for humanity. The CEO of Tesla and SpaceX just gave $10 million to Future of Life Institute. The organization champions ethics and economic models for applications using machine learning and other AI technologies. TechCrunch

ONE MORE THING

Hey, an encouraging diversity stat! Half of the top 10 Fortune 500 companies have women in the CIO role: Wal-Mart, ExxonMobil, Ford Motor, General Electric, and Valero Energy. The top industries for female technology strategists are finance services, energy, and manufacturing. Boardroom Insider

MARK YOUR CALENDAR

IBM ConnectED: Collaboration and digital experience. (Jan. 25 – 28; Orlando, Florida)

IBM Interconnect: Cloud and mobile strategy. (Feb. 22 – 26; Las Vegas)

Gartner CIO Leadership Forum: Digital business strategy. (March 1 – 3; Phoenix)

Microsoft Convergence: Dynamics solutions. (March 16 – 19; Atlanta)

IDC Directions 2015: Innovation in the 3rd Platform era. (March 18; Boston)

Cisco Leadership Council: CIO-CEO thought leadership. (March 18 – 20; Kiawah Island, South Carolina)

Gartner Business Intelligence & Analytics Summit: Crossing the divide. (March 30 – April 1; Las Vegas)

Knowledge15: Automate IT services. (April 19 – 24; Las Vegas)

RSA Conference: The world talks security. (April 20 – 24; San Francisco)

Forrester’s Forum for Technology Leaders: Win in the age of the customer. (April 27 – 28; Orlando, Fla.)

MicrosoftIgnite: Business tech extravaganza. (May 4 – 8; Chicago)

NetSuite SuiteWorld: Cloud ERP strategy. (May 4 – 7; San Jose, California)

EMC World: Data strategy. (May 4 – 7; Las Vegas)

SAPPHIRE NOW: The SAP universe. (May 5 – 7; Orlando, Florida)

Gartner Digital Marketing Conference: Reach your destination faster. (May 5 – 7; San Diego)

Annual Global Technology, Media and Telecom Conference: JP Morgan’s 43rd invite-only event. (May 18 – 20; Boston)

HP Discover: Trends and technologies. (June 2 – 4; Las Vegas)