The opportunity for ServiceNow services partners

AI was on full display at the 2024 ServiceNow user conference, Knowledge 24, in Las Vegas last week. The opportunity for ServiceNow partners was also front and center.

Leading up to and at the conference, ServiceNow announced AI-related collaborations with the likes of NVIDIA, Microsoft, IBM, Fujitsu, InfoSys, Genesys and Equinix (just to highlight a few). NVIDIA’s CEO Jensen Huang took a break from minting cash to demo futuristic AI avatars on the keynote stage, and there were dozens of announcements about how AI and the NOW platform were being used for everything from customer service management to industry-specific processes to talent development.

This shouldn’t be surprising for a company that recently rebranded itself “the AI platform for business transformation” (which is kind of brilliant in our view). ServiceNow claims that process optimization is the number one GenAI use case in the economy today, and they’ve put their platform at the center of it, citing it as “the single pane of glass” for enterprise workflows.Interest in ServiceNow continues to be high across the board, and for good reason.

Those moves seem to be working. In April, the company reported 24% year-over-year Q1 revenue growth and raised full year guidance to more than $10B in subscription revenue. This kind of performance, along with the sheer activity from partners building on, with, and around the platform, underscore why so many investors like Tercera are still bullish on this ecosystem.

ServiceNow: A mature but robust ecosystem for partners

When we named ServiceNow a Market Anchor on our inaugural Tercera 30 list in 2022, it was already considered a fairly mature platform and partner ecosystem. More than 400 partners were active in the ecosystem, Global Systems Integrators (GSIs) were building up practices, and there had already been a fair amount of M&A with early partners like Fruition Partners and Acorio completing successful sales.

Fast forward to 2024, and many of the GSIs now have multi-billion dollar services practices around ServiceNow, and M&A continues to be hot. In 2023, there were eight M&A transactions involving ServiceNow partners, and in the last week alone CPrime acquired INRY, and Insight acquired InfoCenter. Based on recent conversations with investment bankers, that M&A streak is expected to continue. Although in a space as competitive as ServiceNow, it can be tough to stand out to potential buyers.

ServiceNow doubles down on partners

Partners have always been important to ServiceNow’s growth, but the company seems to be taking an even more partner-centric approach in recent years.

Erica Volini, Senior VP of Global Partnerships and Channels at ServiceNow, said in an interview leading up to this year’s conference: “It’s no longer, ‘we sell, partners deliver. It’s ‘we sell more with partners.’… We will do nothing without our partners moving forward.”

ServiceNow seems to be walking the talk too. Internal professional services headcount continues to decline, and the company’s growing reliance on partners was reinforced across dozens of conversations we had with bankers, partners, and ServiceNow execs.

Themes from Tercera’s Knowledge 24 conversations

The energy around the show was electric, and optimism across the ecosystem has never been higher. It seems like ServiceNow is building the right products for the challenges customers are facing and they are treating consulting partners well.

Optimism for 2024 growth
While ServiceNow itself powered through 2023 at 23% YoY growth, some partners had a tougher slog – a trend we’ve seen in many ecosystems. Rising interest rates slowed IT transformation spend and buyers were nervous about pulling the trigger on large projects in an uncertain economy. Last year was especially difficult for horizontal partners without a clear industry vertical or specialized niche. However, bookings momentum appears to be rebuilding across the board. Many partners noted a substantial shift in the fourth quarter of 2023, with multiple firms telling us “they have never been busier.”

Certain sectors are hot
ServiceNow is leaning heavily into partners that are focused on customer service management and public sector initiatives across North America. They are also seeking and supporting partners in regions where ServiceNow has historically had lower market share, including Latin America, Japan, and India.

Larger customers look to value creation
With ServiceNow already embedded in most Fortune 500 companies, focus is shifting to maximizing value within existing accounts. For partners, this means moving beyond transactional relationships to a more consultative approach, expanding their service offerings, and helping customers achieve more with what they already have. Those who can successfully do this are strengthening their relationship with ServiceNow and customers.

Seeking ServiceNow partners

If you are a ServiceNow partner looking to take advantage of these opportunities, we would love to provide the capital, counsel and connections to make that happen!

Tercera is an investment and advisory firm made up of former operators who have decades of experience in IT services. We specialize in high growth cloud ecosystems, and helping services firms break through those plateaus of growth. We have expertise helping dozens of services firms with their organic and inorganic growth strategies, and a highly curated Advisor community that enables founders and their leadership teams to achieve outsized outcomes.

ServiceNow is one of Tercera’s key investment themes for 2024, so if you’re looking to do big things around the “AI platform for business transformation,” we’d love to hear from you.

You can get in touch with us here.

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