Did ServiceNow Just Plant The Seed of Its Own Destruction?

20 Feb, 2018

In recently closing a $56 Million Deal with one of its largest customers to expand the presence of its software globally, ServiceNow left the asset management module out of a deal without telling the customer. It could have been a mistake, that’s common with complex pricing models, so I’ll assume the best of the account manager. And, it happens all the time, particularly with newer salespeople. In fact, it’s happened to me before with my own product.

Back to the story — Upon learning this fact, the VP of IT said, “Are you really telling me that I need to go back to the CIO and tell them that we just spent $56 million dollars with you, but we can’t deploy Asset Management?” Behind the scenes – ServiceNow Asset Management is priced per managed Operating System, so if you’re a large company, it’s a fairly pricey add-on, especially when compared to full solutions like Flexera (as one example). This wasn’t a $10,000 error.

Next — I would be willing to bet that ServiceNow is going to/already has build/t in automatic price increases into their subscription renewals with a guaranteed percentage price increase. Why not? It will help them continue to crush their numbers to the street, which is really the top priority for them. If this happens, will customers jump ship? As they did from BMC when the infamous blue pricing model for Remedy was introduced?

How could they do this? Good question. Answer? It’s a lease. The customer is simply leasing the software which means that they don’t have any more control than you would leasing a car. Legally, there is no “right, title and interest”. If you lease a car, are you allowed to drive it as far as you please without penalty? What happens to you when you turn it in? FYI — 26% of all vehicles purchased in the United States are now leased, up from 19% or so in 2013. SaaS (Software as a service) software purchases are on a similar if not much higher growth trajectory for the time being. Does car leasing save you money? Does purchasing SaaS software? Big questions. Here are some interesting thoughts at a high level on the topic.

My personal opinion is that an organization doesn’t really save money with SaaS, however, ServiceNow has not sowed the seeds of its destruction (that was just click-bait), because switching enterprise applications is too difficult and B2B sales are more about purchasing brand than value. I recommend buying the stock NOW.

What do you think?

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