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Mastering ServiceNow Negotiation – A Guide to Better Contracts

To negotiate ServiceNow contracts effectively:

  1. Understand Your Requirements: Clearly define what you need from ServiceNow.
  2. Research Market Pricing: Know the standard pricing for ServiceNow services.
  3. Evaluate Total Cost of Ownership: Consider all costs, including implementation and training.
  4. Seek Flexibility: Aim for flexible terms that accommodate future changes.
  5. Discuss Scalability Options: Ensure the contract allows for scaling up or down as needed.
  6. Negotiate Support Levels: Discuss different levels of support and their costs.
  7. Consider Long-Term Partnership: Leverage the potential of a long-term relationship for better terms.
  8. Involve Legal and Procurement Teams: Ensure legal and procurement experts review the contract.

A strategic approach, focusing on your needs and the total value proposition, is critical in negotiating ServiceNow contracts.

Introduction to ServiceNow Contract Negotiation

ServiceNow contract Negotiation

ServiceNow, a significant player in the IT Service Management (ITSM) market, is known for its robust pricing power. This article delves into the tactics and strategies for negotiating favorable contracts with ServiceNow.

I’ll guide you through understanding their pricing model, negotiation strategies, and tips to ensure you get the best deal without compromising quality.

Understanding ServiceNow’s Pricing Power

Understanding ServiceNow’s Pricing Power

High Gross Margins & Aggressive Discounts: ServiceNow maintains high gross margins due to minimal internal costs for licensing additional users. This unique position allows them to offer significant discounts while sustaining positive net incomes.

Impressive Customer Renewal Rate: Boasting a 98% renewal rate, ServiceNow demonstrates that once customers onboard, they rarely leave. This underscores the necessity of negotiating competitive pricing from the outset.

Market Comparison: Compared to BMC’s Helix ITSM, ServiceNow’s pricing is nearly double per license. Despite the higher costs, ServiceNow continues to lead in the ITSM space, emphasizing the value of its services.

ServiceNow’s Pricing Tactics

ServiceNow’s Pricing Tactics

Module Bundling: ServiceNow often bundles modules into suites, reducing price transparency. Customers needing additional licenses for specific functionalities within these suites may face escalated costs.

Product Changes: Frequent product sets and functionalities changes allow ServiceNow to adjust prices. This can potentially invalidate previously negotiated discounts.

Strategies for Effective Negotiation

Strategies for Effective Negotiation

1. Leverage Sales Incentives: Understanding ServiceNow’s sales incentives is key. They include:

  • Net New Revenue: Utilize license growth to negotiate competitive pricing.
  • Unrestricted User Licensing Model: Compare this with other pricing models for better deals.
  • Product Weighting: Leverage new products or module releases to renegotiate current licenses.

2. Focus on Individual Module Costs: To counter the module bundling tactic, negotiate costs for individual modules to minimize future expenses.

3. Implement Price Protections: Safeguard against unexpected cost increases due to product changes by securing price protections for current functionalities.

Conclusion: Smart Negotiation for Better Value

ServiceNow contract negotiation requires insightful strategies beyond simple price benchmarking.

By understanding their pricing power sales incentives and employing shrewd negotiation tactics, businesses can secure competitive terms, mitigating future risks and unnecessary expenses.

Remember, premium products don’t always warrant premium rates. You can achieve significant cost savings and a more favorable contract with the right approach and deep knowledge of ServiceNow’s pricing and sales strategies.

FAQ on ServiceNow Negotiation

What is ServiceNow's pricing power?

ServiceNow’s pricing power refers to its ability to set high product prices due to minimal internal costs associated with licensing additional users. This allows ServiceNow to achieve high gross margins on the products sold and offer aggressive discounts while maintaining positive net incomes.

What are ServiceNow's main pricing tactics?

ServiceNow’s main pricing tactics include module bundling and product changes. Module bundling obscures price transparency and can escalate costs quickly. Product changes can undo previously achieved discounts and enforce premiums for the same level of functionality.

How can I combat ServiceNow's module bundling tactic?

To combat ServiceNow’s module bundling tactic, validating costs for individual modules and negotiating better discounting upfront to minimize future costs is crucial.

What are ServiceNow's sales incentives?

Compensation structures and quota initiatives largely drive ServiceNow’s sales incentives. The top three incentives are Net New Revenue, Licensing Model – Unrestricted User, and Product Weighting.

How can I leverage ServiceNow's sales incentives in negotiations?

Understanding and addressing the motivations of ServiceNow’s sales reps can provide valuable leverage in negotiations. For instance, using license growth to reprice current and new licenses can take advantage of the Net New Revenue incentive.

How can I protect against ServiceNow's product changes?

To protect against ServiceNow’s product changes, it’s important to implement price protections for all functionality currently owned. This will safeguard against ServiceNow re-branding the same solution into new products, forcing customers to make new purchases for the same functionality.

Remember, negotiating with ServiceNow is a strategic process.

With the right approach and a thorough understanding of ServiceNow’s pricing tactics and sales incentives, you can secure a fair deal and reduce your ServiceNow spending.

Need Help with ServiceNow Negotiation? Contact Redress Compliance Today!

Navigating the complex world of ServiceNow negotiation can be challenging. But you don’t have to do it alone.

At Redress Compliance, we have a team of experienced professionals who can guide you through the process, helping you secure better contracts and reduce your ServiceNow spending.

Whether you’re dealing with module bundling, product changes, or trying to leverage sales incentives, we’ve got you covered.

Don’t let aggressive pricing tactics strain your IT budget.

Reach out to Redress Compliance today and let us help you master your ServiceNow negotiation.

Author

  • Fredrik Filipsson

    Fredrik Filipsson brings two decades of Oracle license management experience, including a nine-year tenure at Oracle and 11 years in Oracle license consulting. His expertise extends across leading IT corporations like IBM, enriching his profile with a broad spectrum of software and cloud projects. Filipsson's proficiency encompasses IBM, SAP, Microsoft, and Salesforce platforms, alongside significant involvement in Microsoft Copilot and AI initiatives, enhancing organizational efficiency.

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