Microsoft Signs Broad Pact With ServiceNow, Extending Cloud Influence

Nico Grant and Dina Bass (Bloomberg) -- Microsoft Corp. and ServiceNow Inc., makers of cloud-based software, announced a partnership that will help ServiceNow sell to highly regulated industries and further integrate the companies’ technology. 

ServiceNow will use Microsoft’s Azure cloud to host workloads for the U.S. and Australian governments, the companies said Tuesday in a statement. The companies may allow other customers to run ServiceNow applications on Microsoft’s cloud, but didn’t specify when. This is the first time that ServiceNow has made its software available for use with a major public cloud-computing vendor.

Microsoft will also sell ServiceNow applications, helpingServiceNow enter new segments and geographic markets. The agreement may bolster ServiceNow’s stated goal of reaching $10 billionin annual revenue. 

ServiceNow pitches itself as a “digital workflow company” that organizes the basics of business, such as setting up a help desk for IT operations or bringing on board new employees. Its decision to use Azure to run its software, instead of relying purely on in-house server farms, is key for Microsoft as it seeks more customers for its cloud infrastructure services. Market leader Amazon.com Inc. counts many of the biggest cloud-software application providers as clients, including Splunk Inc. and Okta Inc. 

“Microsoft was really best positioned as a broad strategic partner,” Lara Caimi, chief strategy officer of ServiceNow, said in an interview. “We were hearing from our customers that they wanted ServiceNow and Microsoft to work better together.”

Microsoft will also use more ServiceNow software, adopting the company’s Information Technology & Employee Experience product “to improve operations, enhance employee experiences, and deliver stronger business outcomes,” according to the statement. 

For now, the software makers will integrate more capabilities from Microsoft's customer-relationship, accounting, and Office cloud applications with ServiceNow’s programs. The new deal with ServiceNow expands on a limited partnership the companies announced in October. Moving forward, ServiceNow will benefit from Microsoft’s security certifications as it pursues government contracts around the world. 

For Microsoft, the partnership will give the company another ally in the fast-growing cloud-applications space. The world’s largest software maker already partners with Adobe Inc. and SAP SE — companies that compete against a key Microsoft rival, Salesforce.com Inc. ServiceNow also goes toe-to-toe against Salesforce in help desk software, and Microsoft’s plan to sell ServiceNow products to customers fills a key gap in the Microsoft ecosystem. For its part, Salesforce has bought companies that are rivals of Microsoft, such as analytics company Tableau Software Inc. and Quip, which has a productivity suite.

“It's a large vote of confidence in our platform,” said Gavriella Schuster, a Microsoft vice president.

ServiceNow’s stock has gained 65% this year, closing at $293 on Monday in New York. Microsoft’s shares have jumped 35% this year to $136.96.  The Redmond, Washington-based software maker is the world’s most valuable company by market capitalization.

Microsoft and Santa Clara, California-based ServiceNow committed to collaborate on future solutions, and are currently hashing out some of the details. 

ServiceNow may join Microsoft’s Open Data Initiative, a pact with SAP and Adobe to use the same data model so mutual customers can move information among their various systems.