ServiceNow, a leading cloud-based IT services provider, is today announcing a substantial acquisition designed to strengthen its long-term strategy in the areas of automation and artificial intelligence for businesses. The company is acquiring Element AI, a Canadian startup specializing in artificial intelligence.

Established by prominent figures in the field of AI and supported by major AI-focused companies – including Microsoft, Intel, Nvidia, and Tencent, among others – Element AI secured significant funding to develop and deliver AI-driven IT solutions for organizations, often those outside the traditional technology sector.

While the specific financial details of the agreement have not been publicly released, sources indicate the acquisition price is approximately $500 million. This figure represents a decrease in valuation compared to Element AI’s last fundraising round in September 2019, when it was valued between $600 million and $700 million, having raised $151 million (or C$200 million at the time).

Despite the $500 million price tag, this deal marks ServiceNow’s largest acquisition to date, although it does represent a considerable reduction in value from the startup’s previous funding valuation.

According to a company spokesperson, ServiceNow intends to fully acquire Element AI and will retain a significant portion of its technical workforce, including AI scientists and engineers. However, the existing Element AI business will be phased out following the integration of desired assets and capabilities.

“The primary goal of this acquisition is to incorporate valuable technical expertise and AI capabilities into ServiceNow,” the spokesperson explained. This includes the addition of Element AI co-founder and CEO, JF Gagné, who will join ServiceNow, and co-founder Dr. Yoshua Bengio, who will serve as a technical advisor.

Employees not directly involved in these teams will receive support in the form of severance packages or assistance in finding alternative roles within ServiceNow. It is estimated that this may impact around half of the organization’s staff.

Headquartered in Montreal, Element AI will serve as the foundation for a new AI Innovation Hub, which ServiceNow plans to establish to accelerate the development of AI-powered innovations for its Now Platform – the brand name for its automation services.

ServiceNow also intends to integrate some of Element AI’s technologies, while ultimately discontinuing services for most of Element AI’s current customer base after the deal is finalized.

This acquisition represents the latest step for a company focused on building a contemporary platform suited to current business needs.

Under the leadership of CEO Bill McDermott (who joined in October 2019 from SAP), ServiceNow has been actively investing in AI and automation technologies. This has included several acquisitions this year, such as Sweagle, Passage AI, and Loom, for $25 million, $33 million, and $58 million respectively, alongside continuous enhancements to its core workflow automation platform.

Founded in 2004, ServiceNow is working to establish itself as the leading provider of “digital transformation” solutions – a prominent trend in enterprise IT as organizations increasingly move operations online, to the cloud, and to remote work environments in response to the global health crisis and evolving business landscapes.

“Technology is no longer simply supporting the business; it is the business,” McDermott stated earlier this year. In a competitive market where Salesforce could potentially acquire Slack, ServiceNow is strategically expanding its portfolio of tools.

“AI technology is rapidly evolving as companies strive to digitally transform traditional processes and business models,” stated ServiceNow Chief AI Officer Vijay Narayanan. “ServiceNow is at the forefront of this opportunity to improve the work experience for individuals. By integrating Element AI’s capabilities and talent, ServiceNow will empower employees and customers to concentrate on tasks that require uniquely human skills – creativity, customer engagement, and handling unpredictable situations. This represents a more intelligent approach to workflow.”

Element AI was founded on an ambitious vision by Dr. Yoshua Bengio, a 2018 Turing Award recipient, alongside AI experts Nicolas Chapados and Jean-François Gagné (Element AI’s CEO), as well as Anne Martel, Jean-Sebastien Cournoyer and Philippe Beaudoin, who identified a market need.

Their concept involved creating AI services for businesses that were not inherently technology-focused, but nonetheless needed to leverage technological advancements to maintain growth and competitiveness as technology companies expanded into new industries. They aimed to proactively innovate rather than risk disruption.

Furthermore, Element AI could collaborate with and provide services to the technology companies investing in it, allowing them to access specialized expertise and secure additional deals within the enterprise sector. In addition to its four key investors, the company also received backing from organizations like McKinsey.

However, the precise implementation of this vision remained somewhat unclear.

During coverage of the startup’s last funding round, it was noted that Element AI was not forthcoming about its customer base. This remains the case on its website, although it does outline several target industries, including insurance, pharmaceuticals, logistics, retail, supply chain, manufacturing, government, and capital markets.

Element AI also emphasized ethical considerations with its AI For Good initiatives, beginning with work with Amnesty in 2018 and continuing with Mozilla. The year 2018 marked a turning point as AI gained mainstream attention, but also raised concerns about algorithmic biases, facial recognition technology, and the reliability of automated systems, making an ethical stance particularly relevant.

Despite these efforts, it appears that Element AI may not have possessed the necessary elements to thrive as an independent entity. Reviews on Glassdoor also suggest internal organizational challenges, which may have contributed to broader issues.

“Element AI’s vision has always been to transform how companies utilize AI to enhance productivity,” said Element AI founder and CEO, Jean-Francois Gagné. “ServiceNow is leading the workflow revolution, and we are inspired by its commitment to improving the world of work. ServiceNow is the ideal partner to apply our expertise and technology to address the most pressing challenges facing businesses today.”

The acquisition is anticipated to be completed in early 2021.