ISG Provider Lens™ ServiceNow Ecosystem Partners - ServiceNow Managed Services Providers - Australia 2023

The ServiceNow ecosystem is rapidly maturing resulting in optimised client outcomes.

The ServiceNow ecosystem has been one of the true success stories of enterprise technology in 2021 and 2022. The vendor itself has experienced substantial revenue growth and market penetration. For FY22, Generally Accepted Accounting Principles (GAAP) revenue was $7.2 billion, representing growth of 23 percent. This growth highlights the successful execution of the revenue growth and market strategy for ServiceNow. Australia is no different. Whilst ServiceNow does not release revenue numbers for the Australian market, anecdotal evidence from partners, clients, and the overall local ecosystem indicates that growth is above the global rate (allowing for currency fluctuations).

There a several reasons for ServiceNow’s growth. Fundamentally, it is a platform for enabling change in enterprise IT. The focus on enterprise service management (ESM) has enabled clients to accelerate the automation of IT, HR, customer support, security, and compliance processes. This is the first compelling value proposition for the platform.

Flexibility and integration are essential for client investments in ServiceNow to be successful. The platform is designed to make configuration relatively easy for clients. This is a critical component to ensure that workflow solutions meet the requirements of a specific business and not the requirements of the software itself. ServiceNow is an integration tool; as a result, integration ease, functionality and speed are key components of the offering.

According to financial reports, ServiceNow currently spends nearly $2 billion annually on R&D to drive ongoing improvement and innovation in the product suite. This is highlighted by the bi-annual release cycle; ServiceNow has an approach of upgrading twice a year (March and September), with each new release named after a key global city or market, alphabetically. This approach adds some theatre and energy to the otherwise monotonous enterprise software and infrastructure upgrade cycle. It also adds challenges for a client in optimising and managing the upgrade cycle alongside ensuring that business value is generated.

The platform’s scalability, both in the breadth of the organisation and the number of users and touchpoints, is also a key reason for its success. Clearly, the cloud is scalable, and ServiceNow’s offerings are constantly expanding. Recent investments in HR solutions are a natural and integrated extension of the platform’s application in an enterprise. Another factor driving the approach to scalability is the ease of use. In general terms, ServiceNow is considered a relatively easy platform for use by non-technical team members. This is essential as the platform increases its reach into functional areas such as customer service and HR, which can have many non-technical or non-IT employees.

ITSM and IT operations management (ITOM) are at the heart of ServiceNow’s capabilities. As organisations and enterprises have scrambled to digitalise and overhaul these capabilities in the light of the pandemic and the post-pandemic world, ServiceNow has been able to align the ITSM and ITOM strategies for clients. This has been a solution of choice to manage an enterprise’s IT pain point, the disconnect between the delivery of services and the monitoring and measurement of those solutions.

The other critical aspect of ServiceNow’s reach and value generation is the partner point of view. Clearly, there has been a scramble in Australia and globally to build out partner resources and capabilities, just as there has been in the other hyper-growth infrastructureas- a-service (IaaS) and software-as-a-service (SaaS) platforms such as AWS, Azure, and Salesforce. As result, the ServiceNow partner ecosystem is incredibly dynamic, both locally and globally. As with all technology and business platforms, there is a diverse range of partners, from the largest global system integrators (GSIs) to localised niche operators. All are looking to provide solutions on the ServiceNow platform to ensure that clients make the most of their investments. The portfolio of compelling partners has a valid value proposition that is flexible to client requirements and needs that are, of course, varied and complicated by firm. One note of interest for the ServiceNow ecosystem is that it is primarily services based. The ISV ecosystem is relatively modest in comparison with a similar enterprise SaaS platform such as Salesforce or Oracle.

There are three underlying factors that are impacting the services market for ServiceNow in Australia.

First and foremost is the skills issue. Skills are in great demand. As much as ServiceNow is a tool to enable process automation, the skills need to be in place to enable this. Both for onshore and offshore resources, there is a need to accelerate certification and the actual pool of skills. ServiceNow and service partners have a strong commitment to training, but all would love to have extra skills and resources present and available.

Second, and related very closely to the skills issue, is the consolidation in the market. This is occurring globally, and Australia is not immune. In late 2022 the largest Australian independent ServiceNow services partner, Enable, was acquired by Fujitsu and became Enable, a Fujitsu Company. In a similar timeframe, the largest independent ServiceNow partner in New Zealand, Red Moki, was acquired by EY. It is anticipated that consolidation will continue locally and globally, further changing the scale of providers. At the same time, consolidation offers an opportunity for providers to fill the gap and increase presence, scale and visibility in the market.

The third issue is related to ServiceNow’s approach to partnering. Discussions with partners and the ecosystem in this report have made it clear that whilst the market is growing strongly, it needs more support from ServiceNow. As with many large-scale cloud providers, the build-out of a services ecosystem has presented some challenges to ServiceNow. The company has quickly improved its reputation in the eyes of the service partners. Recent changes proposed at the 2023 Global Partner kickoff have been seen in a relatively positive light. There will be changes to partner levels. Some are a concern for some partners. The changes to the investment requirements to make the “Elite” level of partner in Australian level are a concern for some partners that may not have the scale or investment path. At the same time, this same shift to the enhanced level is a challenge for other partners.

For this IPL report, ISG looks at three components of the services market: consulting services, implementation and integration services, and managed services. Each of these markets clearly addresses different client requirements and reflects the maturity of a client’s investment in ServiceNow. As the report highlights, there are some vendors that have the capability to provide services across all three service areas with consistent levels of capability. At the same time, there are some vendors that have specialised capabilities in one or two of the three service areas. No approach is wrong. Whilst some services vendors are looking to go up, or down the stack, the key requirement is that they meet client requirements, build the level of skill required in the market, and, above all else, provide genuine and measurable business outcomes for clients.

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