Just a quick addendum regarding the $NOW (-7,87%) numbers. The short-term effects of the transformation certainly didn’t sit well with investors after the -18% drop, and that should be acknowledged. Among other things: a declining gross margin, GAAP income cut in half, debt tripled, net cash down, and a declining cRPO. However, the company isn’t making a secret of this either.
The fear was that software would become obsolete. In fact, it would be more accurate to say, “Software must transform to survive.” But what does that look like in practice?
One key point is the shift in the SaaS billing model from “seat-based” to “usage-based.” It is precisely this shift that is now becoming apparent at Now; while it creates short-term headwinds, it also ensures the company’s survival. However, this also means that companies that stick with the seat-based model will face challenges in the future.
Why the “Per-Seat” Model Is Doomed
The traditional SaaS (Software-as-a-Service) model was based on a simple logic: More employees at the customer = More licenses (seats) sold = More revenue.
But now that the Agentic AI from ServiceNow becomes so powerful that autonomous AI agents take over the work of human support staff (fulfillers)—as seen in the examples from the Bundesliga or Thrive —the following will happen:
- Customers will need fewer human employees.
- If ServiceNow stubbornly charged per “seat,” they would destroy their own revenuethe better their AI becomes.
ServiceNow’s Survival Strategy: The Shift to “Assists”
ServiceNow recognized the problem early on and is radically restructuring its contracts. CEO Bill McDermott recently announced that about 50% of new business volume (ARR) is already being generated through non-seat models.
The company has a three-tier AI structure (Foundation, Advanced, Prime). Instead of fixed licenses, companies now purchase pools of so-called “Assists” (AI credit tokens).
- A simple AI task consumes 1 Assist.
- A complex, autonomous AI workflow consumes up to 150 Assists.
The genius behind it: When an AI agent does the work of 5 human employees, the customer pays less for “seats,” but ServiceNow earns a massive amount from the millions of Assiststhat the AI consumes in the background. Revenue therefore scales with usage (outcome), not the number of employees.