Gartner sees IT spending climbing 14.2% this year on AI push
ServiceNow Chief Executive Bill McDermott said companies sometimes take a short-term hit to execute a bold strategy, as the company’s shares traded Friday at about $111, roughly 43% below their 52-week high of $194.72.
In an interview with The Wall Street Journal published Aug. 3, McDermott argued that ServiceNow was mistakenly caught in a rerating of SaaS companies driven by a fear of AI disruption. He maintains the company is fundamentally different because it is a platform company, acting as a control tower astride legacy systems and enabling AI models to interact securely across enterprise workflows. ServiceNow has also pushed deeper into markets such as cybersecurity.
“If the CEO isn’t constantly pushing to stay ahead of markets, what’s the point of the job?” McDermott said. “Sometimes you take a short-term hit for executing a bold strategy.”
McDermott said the company’s dealmaking targets substance rather than revenue. “We never set out to buy revenue because we’ve always been a fast growth company. We set out to pursue opportunities of greater substance,” he said, citing the acquisition of Element AI, co-founded by Turing Award winner Yoshua Bengio, a deal announced in 2020, as well as the recent acquisitions of cybersecurity companies Armis and Veza.
“None of this is to suggest that markets shouldn’t influence strategy. Quite the contrary, markets rule,” McDermott said. “Having said that, today there’s a palpable feeling out there that if you only do what you always did, you’ll only get what you always got. The best CEOs will never surrender to complacency. Vision has to supersede fear.”
The exchange comes eight years after Warren Buffett and Jamie Dimon wrote an op-ed in The Wall Street Journal warning that short-term thinking posed a risk to American companies. “In our experience, quarterly earnings guidance often leads to an unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability,” they wrote.
In the Journal article, enterprise technology bureau chief Steven Rosenbush argued that the launch of OpenAI’s ChatGPT in November 2022 changed how CEOs approach risk, with executives thinking more like venture-capital investors than ever before. The venture model, he wrote, is built on longer time horizons, higher levels of risk and the potential for outsize payoffs tied to meaningful breakthroughs in technology. He noted one difference: venture capitalists can spread their risk across a portfolio of bets, while a CEO is all in on one company, with a unique concentration of risk and little margin for error.
Rosenbush cited rising investment as evidence of the shift. The WSJ Leadership Institute reported that Gartner expects IT spending for this year to grow 14.2%, driven by AI — one indicator of the extent to which companies are willing to spend and invest in their growth.
The CEO Brief also carried a comment from Mark McQuade, CEO of Arcee, one of a few U.S.-based companies building open-weight AI models: “We are in the streets training and releasing models. We are not just talking about it. We are trying to have the U.S. catch up to and surpass China.”