When I got on the phone with ServiceNow CEO Bill McDermott on Wednesday, one of the first things I asked was, “Have you been DOGE-ed?”
The White House DOGE Office has made an ambitious effort to slash federal spending. The US government buys a lot of software, and since this efficiency drive kicked off in January, Wall Street has worried about which tech companies might lose valuable contracts.
ServiceNow was among those in the potential firing line, helping to push its stock down by more than 20% this year. Ahead of ServiceNow’s first-quarter results, TD Cowen analysts wrote about “ongoing DOGE concerns.” The company gets roughly 10% of its revenue from the US federal government, so “risks are more acute,” the analysts wrote in a preview.
On Wednesday afternoon, ServiceNow reported Q1 numbers, and these concerns seem to have been unfounded, at least for now. The company beat Wall Street expectations and raised guidance for subscription revenue.
More importantly, ServiceNow said its US public sector business grew more than 30% year-over-year, and it added six new government customers in the first quarter. The stock jumped 11% in after-hours trading.
“Un-DOGE-ed,” McDermott said.
Avoiding DOGE carnage
I asked him why ServiceNow has managed to avoid the DOGE carnage.
The CEO said the company helps organizations save money by providing cloud software that automates many humdrum, but important tasks. ServiceNow’s software can also make it easier to consolidate multiple different IT tools and services under one roof, another way to save.
With DOGE on the prowl and tariff risks denting confidence, if organizations can use software to cut costs, be more efficient, and reduce duplicative services, it might be less painful to keep paying ServiceNow.
That last point may be particularly pertinent to government agencies, which often have many older, less efficient, legacy software systems.
“We’re working with agencies to replace costly legacy systems,” McDermott said. “They realize this is the moment where the software industrial complex has to be collapsed onto ServiceNow. It’s grown in cost and complexity over time due to maverick buying. We’re here to help reduce and simplify that.”
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Savings in Raleigh
McDermott cited the city of Raleigh, North Carolina, which uses ServiceNow to auto-populate personnel forms so different teams, such as HR, IT, Facilities, and Payroll, don’t have to enter the same information more than once. That saves city employees more than 1,302 hours annually, according to a ServiceNow case study.
ServiceNow software also helped Raleigh replace six legacy service-management solutions and reduce the number of employees in the city’s IT call center from eight to two. Those six staffers now work in other areas with the city. Raleigh estimates that it still saved $315,000 a year.
That seems small, though such savings add up over time and across multiple customers. And when Elon Musk goes around demanding agencies cut spending, every little bit helps.
“I like to say that everyone wins in this business, and I still believe that. However, the customer wants some losers now and is looking to consolidate software systems and services,” McDermott said. “In uncertain times, we help organizations consolidate their legacy technology spending.”
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