The Clearsight Team Shares Key Takeaways From ServiceNow’s Knowledge18 Conference

It’s mid-May, which means that ServiceNow, the rapidly-growing enterprise software platform for IT service management (and much more), has just completed its annual Knowledge conference for partners, customers and employees. The Clearsight team was on hand at Knowledge18, where the optimism and excitement about the company’s trajectory was palpable, both on the convention floor and at the many parties thrown by partners up and down the Las Vegas strip. ServiceNow’s $2 billion in revenue last year was double the company’s performance in 2015, and consensus analyst forecasts predict that the company will double again by the end of 2020.

We spent several days at the conference speaking to attendees to get a feel for how this ecosystem is evolving, and what that evolution’s impact will be on the M&A and capital raising environment for the various sales, service, and technology partners who have invested so much in creating expertise around this platform. We left these conversations with several takeaways:

1. The ServiceNow product suite continues to expand quickly beyond ITSM: It’s no secret that ServiceNow, which began as a cloud-based solution for automating interactions between the enterprise’s IT department and its business users, has added many modules to its product suite, including IT operations management, security, customer service management, and HR service delivery, among others. These new components provide more opportunities to cross-sell and expand within existing customer bases, but they also present a challenge for partners who need to keep up with changing functionalities.

2. The app-development platform is now in the big leagues: ServiceNow has offered a “High Productivity Application Platform as a Service” (hpaPaaS) since 2013, but in 2018 Gartner moved ServiceNow from “Challenger” to the “Leader” quadrant within the hpaPaaS market. What technology partners see is an opportunity to expand their app dev efforts beyond the tools and extensions in their app exchange to create fully-fledged enterprise offerings built entirely on the NOW platform—which opens areas to development that ServiceNow does not currently directly address (e.g., CRM or QMS).

3. The Partner Ecosystem has begun (and will continue) to stratify: Even following the recent contraction of the official partner ecosystem, there are still a number of smaller, undifferentiated “me too” players that will have difficulty attracting and retaining top talent as the top tier players expand their footprints. Many services partners spoke of ServiceNow’s increased emphasis on partners’ ability to drive new license sales, which service-only partners see as a challenge in the coming year.

4. Demand for services outpaces supply of certified talent: The diversification of use cases for the product suite and associated platform is driving huge growth in demand for service providers—more quickly than these providers can find qualified people to perform the services. ServiceNow is anxious to see their license adoption and renewals bolstered by competent and efficient implementations, and the partners who can address this need will find themselves well-positioned for success.

5. Access to talent, especially the ability to train resources in-house, is a must: To date, many players have grown by luring away employees from competitors. While this approach has worked for some, this becomes expensive as the demand outstrips supply of talent, and it leaves firms vulnerable to being outbid. Firms that have invested in the capability to train consultants on the ServiceNow platform and bring them into the ecosystem enjoy a cost advantage by mixing in younger, less experienced consultants on their teams, improved corporate culture by developing and investing in their employees, and an ability to withstand turnover without having to overpay for outside help.

While the phenomenal growth of the ServiceNow platform has brought both opportunities and challenges for the company’s partners, the enthusiasm we saw at the conference from attendees of all stripes was evident.

Players that invest in the right growth capabilities—especially sales and training—will find themselves buoyed by the rising tide of this increasingly popular, flexible and powerful software platform. Clearsight anticipates a rising tide of opportunities to deploy growth capital in technology partners that are building enterprise applications on the NOW platform. We also expect to see consolidation within the partner community picking up this year and continuing into 2019 as larger partners look to achieve greater scale and smaller partners find the increased partnering requirements a burden they would prefer to avoid.

In each case, we believe we will see a much higher volume of transactions in the ServiceNow ecosystems than we have been accustomed to seeing over the past few years.