March 20, 2017 –GE Digital’s acquisition of ServiceMax for nearly $1 billion dollars in 2016 was a match made in heaven. Three quarters of GE’s profits involve service, and field service had been ServiceMax’s focus since day one. As Dave Yarnold, CEO of ServiceMax, describes the deal: “It’s just such a great marriage in terms of what we were focused on and how it applied to their business — and how they could take this externally as a commercial offering where they just have so much credibility.”
But as with many notable tech companies, the success of ServiceMax was defined over time and as a result of deliberate decisions: from its origin as a startup-contest winner through its role in solidifying an underappreciated industry to it becoming a significant part of a $140b company.
The Benefits of a Third-Party Platform
The story of ServiceMax begins a year or so before Yarnold’s arrival as CEO. He singles out the key decision by founders Athani Krishnaprasad and Hari Subramanian to employ Salesforce.com as the company’s platform. “It got us going very quickly,” Yarnold says, contrasting the use of a third-party platform with life at the job he’d come from. “My prior company was SuccessFactors, the human resources software leader, and we spent a lot of time and effort and money on platform.” He estimates that much of SuccessFactors’ early research and development was about building out and maintaining its homegrown platform. “It really slowed down our speed of delivering new capabilities that our end users wanted,” he says. “We had to build out the platform before we even could start to create those features and functions.”
“In the case of using ServiceMax, we didn’t have to worry about enabling the platform. All we did was focus on the end users, and just build the stuff that mattered to them,” he says, ticking off a list of things the then new company didn’t need to concern itself with, including security and the ability to manage scale. The Salesforce platform’s ubiquity didn’t hurt ServiceMax, either: “Because we were building on this platform that companies were already predisposed to want to use, it just made the initial conversation with prospects a whole lot easier. It gave us a leg up in terms of credibility, and obviously we were playing within their ecosystem.”
Eventually ServiceMax became one of top five apps in that Salesforce ecosystem, alongside Veeva and FinancialForce, among others. In fact, ServiceMax began as a Salesforce exemplar, when Krishnaprasad and Subramanian won a 2008 contest cosponsored by Salesforce and Emergence Capital. “They won based on the app itself and customer use cases,” among other characteristics, explains Yarnold. “The prize was that they got funded by Emergence and Salesforce.” This was right around the time Yarnold was looking to leave SuccessFactors, following that company’s IPO. He also knew the field service business from what he calls “an earlier life,” when he ran North American sales for Clarify (later acquired by Nortel). “It was a neglected space that we uniquely chose to focus on,” says Yarnold of his time at Clarify, “and it won us some really big deals. Field service helped us to differentiate among the first generation of CRM providers.”
Hiring to Scale
For the first year or so, ServiceMax had everything its new CEO, Yarnold, needed: “I had fantastic talent in the founders, and great technical, and product, and market awareness — all that good stuff.” But just because Salesforce could support a scaling business didn’t mean the scaling came naturally. “I needed sales, marketing, and services capability,” says Yarnold, thinking ahead to what was necessary for the firm to level up.
“I had this dream when I had my few months off after SuccessFactors: wouldn’t it be great if I could come back, be the CEO of a company, and then somehow manage to convince a handful of people — and I had a few people in mind — to come join me as kind of a dream team?” Not only did he assemble the team, but he consolidated the core of it in one momentous week. “I got incredibly lucky,” he says, of hiring three key individuals from SuccessFactors, two of whom he’d recruited to that previous company in the first place. These were Stacey Epstein, who joined as CMO, Scott Berg, who joined as Head of Sales and eventually became COO, and Karen Pisha, as head of Services.
Yarnold makes a simple case for bringing in big-league executives early: “Adding those three senior leaders was like we had that dream team that could scale for years. What determines your success is the people that you hire into the company, and in order to hire great people you have to have great people, and we just had a tremendous team across the board.”
Building a Community
Yarnold singles out the efforts of CMO Epstein to research and synthesize the underlying unique aspects of the field service industry. “When we sat down with Stacey, the first thing we said was, ‘All right, field service: I wonder where these people hang out, what do they read, where do they go in terms of marketing events. Online, where do they go for knowledge and data and, you know, sharing things?’”
At the time, Yarnold estimates there were some 20 million people in field service around the globe, and yet they had no organizing principle. “There was nothing,” he says. “There was no community out there for field service.” ServiceMax set out, in turn, to build what was at first called the SmartVan and later evolved to FieldService.com. Yarnold describes it as an “impartial” source of information: “We’ve been feeding this site with content about field service, like taking care of baseball stadiums, and all kinds of crazy equipment.”
“That was our goal, to create this global community of people who were proud field service people who had been neglected by the software industry,” says Yarnold of the “invisible army,” as he puts it, of white vans with people in them who keep things working. SmartVan began as a “brute force, bottoms-up” effort, and became an indispensable tool to give shape to the market with which ServiceMax would become synonymous.
“That was our goal, to create this global community of people who were proud field service people who had been neglected by the software industry.”
The Wages of Leading
It was during 2011 that ServiceMax didn’t just double but triple its business, not just the size of the company, but its bookings as well. As a result, the pitch became easier, especially to established global companies. “All of a sudden,” says Yarnold, “these big, global brands were looking at us as kind of like, ‘Hmm, you guys have something very unique that is a big part of our business, and we’re going to start doing projects with you.’” He ticks off some of those major deals: Schneider Electric, Tyco, Procter & Gamble, Motorola — and, though the acquisition was more than half a decade away, GE.
ServiceMax had gone from being an unknown in an underappreciated sector to being the leader in a sector seen as a major source of revenue. For a CEO of a rapidly growing company, the sign that things were changing came when clients were signing contracts without any involvement from him. “It’s part of the deal when you’re the CEO. You’re trying to sell to big companies and they want to know that you’re going to be around. You have to go and fly to see the decision makers and reassure them.” Then Coca-Cola Enterprises happened. “I didn’t have any interaction during the sales cycle and I ended up spending a lot of time with them afterward because Coke was, and still is, an important customer. But not having to do that was kind of like, ‘Huh, this thing is starting to scale — very interesting. It’s kind of weird.’” A very good weird.
The Preemptive Investment
When describing the investments that made this period possible, he brings up Mayfield’s Rajeev Batra. The two had met through a former WebEx executive. “I’m really a chemistry and relationship person. I was getting ready to do my B round, and I wasn’t just looking for checkbooks. I was looking for partners.” He mentions stories he’s heard of board relationships and investors “that get sideways” with their CEOs. “It takes me a while to warm up to folks to the point where I feel like ‘All right, I want to have a long relationship here.’”
Thus it was that Batra arrived late enough to the B round that Yarnold went ahead instead with another firm. Batra didn’t let the closing of the Series B dissuade him. “He didn’t give up,” says Yarnold. “He really believed in us and our market, he was one of the few VCs who knew CRM and especially field service really well from working with industry leader Siebel, where he had spent some time, and he just kept after me.”
In time, Batra and Mayfield proposed a pre-emptive round for Series C. “It was very compelling,” recalls Yarnold. “I didn’t have to go through a whole fundraising round, it was a great valuation, and I had a great partner. By then he and I knew each other really well, and we have a great relationship to this day. He’s just been a great board member and supporter and has become a good friend. For a long time he didn’t let me forget about missing out on the B round, but now it’s all good for everybody.”
“Dave Yarnold, Athani Krishna, and Hari Subramanian had a vision for how to transform the services industry, which makes up 80% of the overall U.S. economy, using a cloud and mobile platform. Now part of GE Digital, ServiceMax is elevating field service as a core differentiator for the world’s biggest brands.”
Rajeev Batra, Mayfield
When Your Message Precedes You
All that work with SmartVan combined with the tripling of the business changed the marketplace, and how ServiceMax was perceived. Gartner’s Magic Quadrant, which had once positioned ServiceMax in the lower left corner, was steadily moving it up and to the right. People were repeating Yarnold’s own messaging back to him. “People would come to me and say, ‘Do you know there’s 20 million field service technicians around the world?’ And, yeah, I do know that. I think I’m the one that kind of raised that for everybody.”
And then Jim Cramer called. “Out of the blue I get this invite to go on Mad Money on CNBC,” says Yarnold. “I’d never been on TV before and we had never really gotten any kind of national press, so that was cool. It was important enough for Cramer to put us on because he liked what we were doing. He liked what kind of customers we were dealing with. Most of the interview had to do with, not our valuation or anything like that, but it had to do with who our customers were and how they were using us.”
He cites the Mad Money appearance as a big moment that resonated within the company. “But what was really interesting is how many emails I got from CIOs and COOs from big companies congratulating me on it,” he says. The show aired in the early evening on the East Coast, and he immediately started getting feedback. “It kind of had the feel of ‘Huh, we have entered into another realm now.’ We’re no longer an unknown startup. We’re becoming a serious player in our space.” He distinguishes the value of such experiences from paid media, in which he places little value.
Partner as Competitor; Client as Owner
In 2016, ServiceMax’s origin as a Salesforce competition winner came full circle — when Salesforce announced it would become a ServiceMax competitor.
“We had kind of known that this was going to happen for a couple of years,” says Yarnold of Salesforce’s field service offering. “We could see that they were coveting this massive market.” But aware doesn’t mean inured. “Even though we anticipated it, it was still a shock for everybody, because we are great partners with Salesforce. They support us, they support our customers, but like a lot of these big enterprise players, they saw a big market and they said, ‘We can support you and we can also be in this market directly.’”
The Salesforce announcement set Yarnold’s phone ringing. “I started to get really interesting partnership calls from every major player in the enterprise world.” All the suitors recognized the potential for field service, and they wanted to provide a home and resources to ServiceMax. “It kicked off a process of six months or so of increasingly interesting conversations, which culminated in GE getting very aggressive and making a really compelling offer from a number of perspectives. Financially it was great, but also where their business is and how they’re building out their digital industrial strategy, and the role that we could play within that.”
The GE deal marked a strong finish to what Yarnold calls “a crazy year” — and to ServiceMax’s nearly decade-long rise to lead the field of field service.