ServiceNow Enjoys a Switching Cost-Driven Moat and Has Emerged as a Software Titan

ServiceNow has been successful so far in executing a classic land-and-expand strategy. First, it built a best-of-breed SaaS solution for IT service management, or ITSM, based on being modular and flexible, having a superior familiar user interface, offering a way to automate a wide variety of workflow processes, and becoming a platform to serve as a single system of record for the IT function within the enterprise. Having established itself in ITSM and the IT operations management, or ITOM, market, the firm moved beyond the IT function. The same set of product design features and technologies allowed ServiceNow to bring its process automation approach to HR service delivery, customer service, finance, and operations. The firm then introduced more sophisticated and industry-specific versions of its core solutions. In September 2023, ServiceNow was one of the first software companies to release generative artificial intelligence solutions. Each of these products carries higher pricing to help drive incremental growth and boost margins.