(Bloomberg) -- ServiceNow Inc. said President CJ Desai is leaving the company after an investigation uncovered policy violations related to a government contract and the hiring of a former US Army official.
Desai, one of the software maker’s most prominent executives who also serves as chief operating officer, resigned from all positions within the company effective immediately, ServiceNow said Wednesday in a statement. Raj Iyer, a former Army chief information officer who has been ServiceNow’s head of public sector since early 2023, also departed the company.
The investigation began after a complaint “raised potential compliance issues during the procurement process related to one of its government contracts,” the software company disclosed in a May regulatory filing.
“As a result of the investigation, the company’s board of directors determined company policy was violated regarding the hiring of the former Chief Information Officer of the US Army,” ServiceNow said in Wednesday’s statement.
In December 2022, while Iyer was the Army’s chief information officer, the military branch awarded a contract to ServiceNow at a value as much as $432 million. The deal, which included consolidation of existing spending and new purchases, authorized 1.2 million licenses to ServiceNow’s applications for technology, operations and customer service management.
“In the public sector, Raj Iyer led the biggest digital transformation effort in the history of the United States Army,” Chief Executive Officer Bill McDermott said during an investor event in May 2023. “He did his service to the country — he served the time in his agreement with the Army and he chose to come here because the transformation was on the ServiceNow platform.”
That hiring decision was “ill-timed,” McDermott said Thursday in an interview on Bloomberg Television. Hiring processes will be tightened, and the company will “make sure we have express written consent from various organizations that may have people available to be hired by ServiceNow in the future,” he said.
Iyer, in a message, said his “leadership in the digital transformation of the Army was driven by a genuine dedication to service, with no intent of personal gain,” adding that his work at the military branch drove down costs and improved performance. “I am confident that my conduct has been beyond reproach. My resignation from ServiceNow was voluntary and aligns with my personal values, and I do not wish to have my integrity questioned as a result of a potentially compromised hiring process.”
Desai didn’t respond to a request for comment. He joined ServiceNow in December 2016 as chief product and engineering officer and was promoted to COO in January 2022. He was named president in January 2023. He has fully cooperated with the investigation and maintains that he didn’t intentionally violate company policy, ServiceNow said in a separate regulatory filing on Wednesday.
McDermott said in an interview Wednesday that Desai’s resignation won’t have any impact on ServiceNow’s execution, results or government contracts. “Let me be crystal clear — this is an isolated incident.”
Chris Bedi, an executive who has been with the company for almost a decade, will serve as interim chief product officer. “While CJ has been a critical thought-leader driving the product innovation in the past years, we believe the company has a deep bench of talent,” Kirk Materne, an analyst at Evercore ISI, said after the announcement.
ServiceNow said it had informed the US Justice Department, the Department of Defense Office of Inspector General and the Army Suspension and Debarment Office of the company’s investigation. The company said it’s continuing to cooperate with the Justice Department, which is also investigating the incident.
--With assistance from Caroline Hyde and Paayal Zaveri.
(Updates with comments from Iyer in the eighth paragraph.)
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