10 Tips for Your ServiceNow Contract Negotiation

June 25, 2024
IT ServiceNow

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IT managers are under more pressure than ever to control costs. It’s a challenging balancing act to ensure you are providing the right tools your business needs while also getting best-in-class pricing.

This is made even more difficult when you don’t have access to insider knowledge about pricing from recent transactions. ServiceNow sales reps are professional negotiators and they come armed with deep data and product knowledge you likely don’t have. This can easily lead to overpaying or winding up with SKUs that you don’t need.

NPI’s ServiceNow Purchase Optimization Services helps enterprises save an average of 10% to 30% on their ServiceNow purchases and renewals by leveraging real-world transaction data to level the playing field.

ServiceNow’s Expectations from Their Customers

You need to first understand how ServiceNow approaches sales and renewals. Here are some of the key things their sales reps focus on.

Multiple Products

ServiceNow knows that it makes it harder for customers to move to other products when multiple parts of your business use their products. The more products you use, the more you get locked into renewals. Yet, we often find unused products that increase the price.

IT and Business Executives

Sales reps are focusing their efforts more on C-suite execs. They know that to maximize adoption, there needs to be widespread buy-in, so they need to include more than just CIOs and other IT leaders. If your team isn’t aligned on goals, it can be a problem.

$1M in Annual Contract Value

Nearly 1,900 customers are at the $1 million plus level and that number is growing about 15% per year. ServiceNow focuses on growing its biggest accounts — moving spending levels from an average of $3 million in 2020 to $4.5 million in 2024.

Against this backdrop, you need to enter any ServiceNow contract negotiation with the information and data you need to extract maximum value from your licensing without overpaying.

10 Tips for Your ServiceNow Contract Negotiation

Looking to optimize your ServiceNow contract negotiation? Here are 10 tips that can help.

Understand Your Current Contract & Utilization

You need a clear understanding of your current contracts, utilization, and plans for ServiceNow integration. These steps should be taken before you start the negotiation process to focus your efforts.

1. Strategic Alignment of Purchases and Renewals

Assess your current ServiceNow contracts and ensure they align with your IT roadmap. Invest in the solutions that your team and infrastructure are prepared to support, focusing on priority implementations that deliver the highest ROI.

2. Base Licensing on Usage

For new purchases, you will want to conduct a usage analysis across your organization to determine the licensing combinations you actually need. Depending on the job and needs, not everyone may require access to the highest levels of licensing. You should evaluate different scenarios to choose the SKUs that right-size your spending.

3. License Optimization Assessment for Renewals

If you are heading into license renewal negotiations, conduct a license optimization assessment. This will identify the licenses that can repurposed or terminated. The majority of enterprises have unused licenses that simply add to costs.

Develop Your ServiceNow Negotiation Roadmap

As you plan your negotiation, make sure you come to the table with the information you need. Knowing where ServiceNow has flexibility in pricing, terms, and options will help you structure better deals.

4. Benchmark and Optimize Pricing

ServiceNow contract negotiation often yields significant price discrepancies. Customers making similar purchases may see transaction pricing and discounts that vary greatly — leading to overpayment. Benchmarking actual transactions is the only way to ensure you are getting fair market pricing.

5. Understand Business Terms

Business terms can also vary from contract to contract and create hidden costs. Price protections, service level agreements, and data ownership rights can be tuned to prevent unnecessary costs.

6. Know the Available Product Options

ServiceNow’s portfolio and pricing models change regularly, especially as they phase out old offerings and expand their enterprise footprint. Negotiating the best deal requires an understanding of the full mix of SKUs, and licensing models to optimize usage and costs.

For example, are you better off purchasing ServiceNow ITSM Enterprise or IT Service Management Standard and Professional licenses? Do you need both Discovery and Service Mapping, which can be bought together or separately?

7. Know What’s Negotiable

Despite what you may hear, there are options to negotiate that go beyond basic pricing and terms — if you know what to ask for. For example, you may be able to negotiate future product price protections, renewal price protections, or swap rights for products or volumes you aren’t using with a particular product.

8. Stay Focused on Your Needs

You need to stay focused on what you need and not what they’re trying to sell. Make sure discussions focus on how their solutions provide value that aligns with your needs. You will want to create a roadmap for growth over time, which may help get price concessions now with the potential for expanded offerings in the future.

9. Create Internal Alignment

Make sure everyone in your organization is on the same page. This helps present a unified message to the ServiceNow reps. This signals that any concessions or change you are asking for is a company-wide initiative and not just a procurement exercise you undertake with all vendors.

Exploring Other Options

Another negotiating tool is knowing your options, such as third-party providers that may help with some levels of implementation or service.

10. Consider Third-Party Services

Before you commit, explore third-party alternatives for professional services. You may be able to find less expensive ServiceNow implementation, customization, and support at significant savings. However, you will also need to benchmark prices to ensure you get the best deal.

Be Prepared for Your ServiceNow Negotiation

ServiceNow has a strong culture of pushing customers to buy more than they need or before they are ready to implement and adopt products. That’s become more prevalent in the past five years and customers are paying the price.

You need expert information on your side of the table to strike the best deal and avoid overpaying. This is especially challenging because of the increasing number of SKUs, changing product options, and licensing complexity.

NPI brings transparency into the process, providing you with benchmarking based on actual ServiceNow transactions. Over the next 12 months, 85% of companies will overpay for their IT purchases. We can help you avoid overpaying and achieve best-in-class pricing, while aligning your IT and business roadmap with ServiceNow’s.

Contact NPI today to discuss your options.