Just when you started to think 2020 couldn’t get any more bizarre, try this on for size: as of this morning, ServiceNow’s market cap had jumped to $100 billion while that of its new AI partner IBM had slumped to $104 billion.
The power of positioning
Yes, in today’s wacky world, investors have determined that high-growth ServiceNow and its brilliant digital-workflow positioning and capabilities should be valued just about on par with iconic IBM, for decades one of the world’s best-known and most-admired brands.
There’s no “fair” or “unfair” angle here. It’s all part of the free-market capitalism game in which those whose vision and execution capture the imaginations and confidence—and thereby the financial investments—of the market are rewarded for their ambition and innovation.
AI partnership to optimize IT workflows
Those companies that fall short of that lofty standard have no alternative but to get back to work with even more dedication, focus, and customer-centric passion.
For ServiceNow and IBM, it is wildly ironic that these two companies with such markedly different backgrounds should reach this market-cap equilibrium within days of launching an innovative partnership around AI-powered digital workflows.
ServiceNow’s IT Service Management product, which tracks historical incidents within IT organizations, will pair up with an IBM Watson AI solution to analyze that historical data and develop the ability to predict and address future problems.
Deeper partnership looming?
Yeah, that’s pretty wonky stuff—but my guess is it’ll be only the first step in a broader and deeper partnership between the two companies that lets them apply that same approach in other areas including customer service, cybersecurity and other categories in which both companies play.
And, from the perspective of the market-cap dynamic, each company has something unique and potentially high-value to gain from the partnership:
- ServiceNow gets the chance to put its technologically advanced digital-workflow tools in front of hundreds or perhaps thousands of IBM’s customers around the world; and
- IBM gets to not only showcase some real-world enterprise solutions for Watson but also do so in close partnership with a company that the market sees as a high-flying leader of tomorrow.
McDermott’s incredible impact
I’d guess that the driver behind this partnership was ServiceNow CEO Bill McDermott, who in just one year in that job has taken ServiceNow on an extraordinarily expansive journey in market relevance, innovation, growth and visibility.
McDermott and IBM CEO Arvind Krishna made a 1-minute video describing the partnership, and both leaders speak passionately about the combined value they can provide to big customers.
McDermott concludes the video with one of his classic calls to action: “And to all the C-suite leaders out there who need to move faster with digital transformation, if you hear from IBM and ServiceNow, you’ll know that Arvind and I sent them and we’re both united and here to help!”
And perhaps only in 2020 could we see that iconic IBM, with its $70-plus billion in annual revenue, needs $4-billion ServiceNow more than it needs IBM.
Market-cap madness indeed.
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