ServiceNow Exec Paul Smith: ‘Massive Demand’ For Partners
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‘We will take minority positions in smaller and midsize partners with a specific view towards giving those partners the equity, the capital, to basically bring in new skills and talent, train those skills and talent, take a little bit of the heat off them from a revenue perspective. We’re giving a nice investment into them so that they can train them up and then go and start to execute,’ says ServiceNow Chief Commercial Officer Paul Smith.
“The opportunity is massive,” Smith told CRN. “There is a supply shortage of partners. One of the things I want to make sure is that we never sell too far ahead of the capacity of our partner organization to be able to deliver massand execute. And in some markets, in fact everywhere, there is massive demand for ServiceNow skills.”
For ServiceNow, the answer in part seems to be a steady stream of new partners, Smith said. Filling that stream are a significant number of startups that are focused exclusively on ServiceNow opportunities, many of whom are receiving equity investment from the $150 million the vendor has set aside to help those partners get the right skills, particularly around GenAI, and build their businesses.
[Related: ServiceNow And GenAI: Seven Key Takeaways From CEO Bill McDermott]
Many of those startups are in turn acquired by larger solution providers looking to expand their own ServiceNow capabilities, he said.
“We are actively recruiting more partners,” he said. “Because I think, I know, it’s a conveyor belt of partners and talent in that, as we’re growing, the partner ecosystem is growing. We need more skills and talent. But equally, the likes of Fujitsu and NTT and Deloitte and EY are constantly on the lookout to acquire partners that will grow their ServiceNow practice.”
In terms of partner recruitment, ServiceNow emphasizes a balance between pure-play partners and those with diverse technology expertise, Smith said. The company’s priorities for 2024 include ensuring front-of-mind presence in customer platform choices, scaling growth markets, and delivering innovation across the board, he said.
There’s a lot going on at ServiceNow. Here is more from CRN’s interview with Smith, lightly edited for clarity.
At the recent ServiceNow Knowledge conference, there seemed to be a lot of discussion about larger channel partners, and less about smaller partners. Where do those smaller partners, which ServiceNow lumps under the ‘reseller’ category, fit in the company’s plans?
On the resell side, in particular, 15 percent of our business today comes through partner resellers, and that’s happened largely organically. There are some partners that are systems integrators, some partners that are resellers, some partners that are both, etc. What we’ve not done historically, but we’ll do now, is manage a component of our partner community as a true channel business. This is going to be the likes of Carahsoft, which is huge in the U.S. federal government business, CDW, SHI, Computacenter, SoftwareOne, Cancom. We’ve got a lot of partners, but a rump of them. …
Rump?
British expression. A collection. Rather than focusing on everyone, we’re going to go deeper with that kind of collection of partners, and really focus them on resell, and particularly focus them on resell in terms of new logo acquisition. It’s an add. They’re going to continue to do all the other things we do with them, and we’re going to put that very, very specific focus on them. We have 8,000 customers today. We have a potential marketplace that we want to capture of 50,000 customers. We could go for way more, but we’re keeping it deliberately above a certain level of the market. And to help us acquire those 50,000 customers, that partner resell piece is going to be massively important. That’s why we will double down with the likes of CDW, SHI, Computacenter, SoftwareOne, Cancom.
But looking beyond those mid partners, I love the likes of Glidefast, NewRocket, and Thirdera because they have enough scale to handle complex, big integrations. But they’re also small enough to be agile, and to be very focused and very targeted. And now you see Thirdera being acquired by Cognizant. That’s great. There is going to be this constant conveyor belt [of newer partners getting acquired]. We saw this happen in the Salesforce partner ecosystem. Partners would grow, they’d get bought, they’d get consolidated. We see it happening with the likes of Fujitsu who acquired Enable Professional Services, and there’ll be others. That’s great. Great for Enable, great for Fujitsu.
One thing we’re doing is we put aside $150 million of our $1.5 billion venture fund to specifically target investment in partners like we did with Blueship in Japan, like we’ve done through Tquila in other geographies, like we’re going to be doing in other markets. I just had lunch with NTT, and one of the biggest topics of conversation was, how do we collectively with NTT, also a partner of ours, go and find and invest in a wave of midsize partners to bring more skills into the ServiceNow marketplace? So it’s a big part of the plan.
Now when you say invest, you’re talking about taking equity positions in these partners?
Yes. You’re going to start to see a number of our bigger, more strategic partners will use straightforward acquisitions. Sometimes they will invest. But what we will do at ServiceNow is we will invest. We will take minority positions in smaller and midsize partners with a specific view towards giving those partners the equity, the capital, to basically bring in new skills and talent, train those skills and talent, take a little bit of the heat off them from a revenue perspective. We’re giving a nice investment into them so that they can train them up and then go and start to execute.
It is also interesting to see how many new solution providers are entering the business focused exclusively on ServiceNow. Companies like Astrica, which was founded in 2022, or CoreX, which just started late last year. What’s behind that?
The opportunity is massive. There is a supply shortage of partners. One of the things I want to make sure of is that we never sell too far ahead of the capacity of our partner organization to be able to deliver and execute. And in some markets, in fact everywhere, there is massive demand for ServiceNow skills. So that’s one reason.
The other is, I think these partners have seen the success of the pure-plays that are in the marketplace already, like GlideFast, like Infocenter, like Enable getting acquired, like Thirdera getting acquired. So it’s actually a pretty good business plan. You start a ServiceNow partner, you grow it, you reach a certain level of scale. Because you’re a pure-play, sales leaders lean in and support them, just like [ServiceNow President, Americas] Tom Hannigan is joined at the hip with the North American leader of NewRocket. And because it’s a true partnership, because it’s a pure-play partner, they only do ServiceNow, so of course we would like to accelerate those partners very, very quickly.
And then there’s others like The Whole Group. I actually bought them into the ServiceNow ecosystem because of the two founders there, Paul Andrew and Peter Goodman. Paul Andrew founded Tquila in the Salesforce ecosystem which became a pure-play Salesforce partner way, way back in about 2013 or 2014 before they got acquired by Accenture. And then he did it again, with another pure-play Salesforce partner that got acquired again, so he knows how that model goes. So we were, ‘So go and do what you did, but now in the ServiceNow ecosystem. And by the way, go and find all of those Salesforce Service Cloud consultants that aren’t in as much demand as ServiceNow customer workflow consultants, because we can cross-train them quickly and easily.’ They’re gonna take those resources out of that ecosystem and put them into our ecosystem. And if you do that, you’re gonna have my full support, and we’re gonna go and do some amazing things together. That’s what we’re doing.
Is ServiceNow actively recruiting partners? Do you prefer to work with pure-play partners, or with partners with a mix of technologies?
First, we are actively recruiting more partners. Because I think, I know, it’s a conveyor belt of partners and talent in that, as we’re growing, the partner ecosystem is growing. We need more skills and talent. But equally, the likes of Fujitsu and NTT and Deloitte and EY are constantly on the lookout to acquire partners that will grow their ServiceNow practice. You saw it with EY and whyaye. You saw it with Fujitsu and Enable. And you saw it with Cognizant and Thirdera. And there are many, many other examples. So we have to constantly bring partners in and create that moving conveyor as they grow bigger and bigger and bigger and get acquired. All good. That is why I think in that mid-size space, pure-plays generally grow faster, and then become a great vehicle for some of the larger partners growing their practices. And customers need both. Customers need partners that are just the best in the world at implementing customer workflow or the best in the world at implementing AIOps on ServiceNow. I support that. But then equally, some customers need a partner that can do the overall program management, governance, and deep integration to SAP as well as the ServiceNow implementation, as well as bring some skills and expertise in some other areas. So the genuine honest answer is, we need both in the ecosystem.
What are some of ServiceNow’s priorities in terms of building out the customer base and the partner base for the rest of 2024?
I would say I’ve got three. One is making sure that we absolutely remain there at the front of the decision-making thought process for all of our strategic customers around their GenAI platform choice. So if you’re Siemens, you’ve decided on ServiceNow Now Assist to be part of your GenAI answer, just like Novartis did, just like BMY Mellon did. They made a significant platform bet on ServiceNow and Now Assist AI for employee self-service, case deflection, customer service, code generation, text-to-workflow. So the number one priority is that we are front of mind when it comes to customers making that platform choice.
The second priority is massively scaling up our growth markets. Our business is growing very, very fast places like the U.K., France, Germany, Japan, Canada, Australia. Those six markets are poised to become our next billion-dollar businesses. We’ll continue to support those as they grow at scale. …
And the third is, there is a ton of innovation that that we have at ServiceNow. Yes, there’s all of the GenAI stuff. But there’s also order management in the front office. There’s extending the perimeter of ServiceNow from IT out to the edge and start taking in factories and OT and so on. We’ve introduced even better employee self-service for employee experience and so forth. And so candidly, the third priority is making sure that we are taking all of that innovation to every single customer, and that my field organization and our partner ecosystem is appropriately enabled on all of those new technologies so they can represent to our customer base. Because if you think about it, we got 8,000 existing customers, we’ve got all of this innovation, and taking that through the aperture of our sales team and the aperture of our partner organization, we have more innovation than is easy to consume.
Talk a little about ServiceNow’s sales culture and partners.
The historic culture of ServiceNow was the going-to-market organization would hand over to the partner organization for execution. Particularly now, we’re solving increasingly big business problems for companies, whether that’s in healthcare and life sciences, financial services, all that. And the only way we could truly execute for our customers is if that handover between the field organization and the partner organization is seamless, which means there needs to be co-selling all the way through. There has been a subtle but important mindset shift. I stood up at our SKO (sales kickoff) in 2023 and in 2024. And it’s the difference between being partner-friendly, which we have always been, and being very proactive and deliberate with partners and saying we only win with a partner. That’s just a fact. And I am a big fan of us joining up with partners and choosing to win together early and go into market together, and ultimately be very, very successful together.
What part of ServiceNow’s business is via indirect sales?
Nearly 100 percent of our business has strong partner engagement. Now that could be the partners bringing us the deals or reselling the deals, but also our field organization joined up with the partners. In terms of partners purely reselling, it’s 15 percent of our business. And then there’s the MSPs, which is 14 percent of our business. And then there’s sourcing, where a partner brings us a deal and implements the services on top. They’re sourcing about 17 percent of our business on average. So it’s not as simple as this percentage of our business is direct, this percent is indirect. The lines are a bit more crossed than that.
We have our own services business, which I would say is about 5 percent. For services implementations globally, partners are responsible for 95 percent. And the reason we have that service organization for that 5 percent is typically they’ll be doing the new stuff where the skills have yet to permeate in the partner community. And typically they’ll be doing the new things in conjunction with a partner. So new product, we’ll implement it first. And we’ll bring some partners with us. Next step is a partner implements it and we’ll have one or two of our services people embedded. After that, partners are pretty self-sufficient.
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‘We will take minority positions in smaller and midsize partners with a specific view towards giving those partners the equity, the capital, to basically bring in new skills and talent, train those skills and talent, take a little bit of the heat off them from a revenue perspective. We’re giving a nice investment into them…
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