ServiceNow and the Workflow Revolution: Unlocking Opportunities for Partners

ServiceNow has evolved dramatically since its inception in 2004. Initially launched as a ticketing system for IT professionals to manage and track IT-related incidents, the company has undergone a remarkable transformation. Today, ServiceNow is consistently growing in the 25% range and positions itself as a leader in end-to-end workflow automation, offering solutions across IT, employee, customer, and creator workflows.

The cornerstone of its expansion strategy is its low-code platform, the Now Platform, a leader in the Gartner Magic Quadrant since 2020. ServiceNow’s success is evident in its land-and-expand strategy, capturing most customers through its flagship ITSM (IT Service Management) product and leveraging enterprise IT departments to champion adoption in adjacent areas, such as governance, risk, and compliance (GRC), human resources (HR), and customer workflows. It has also succeeded in engaging C-suite executives keen to ensure seamless integration across business applications.

At Volpi Capital, we are strong believers in the ServiceNow partner ecosystem. We have engaged with approximately 25 companies in this space and have collaborated with several members of ServiceNow’s senior management.

Our investment thesis in this ecosystem rests on three pillars:

1. ServiceNow is a winning platform with an expanding addressable market.
2. The platform has a synergistic and increasingly reliant relationship with its partner ecosystem for implementation and growth.
3. ServiceNow seeks pure play consultancies of scale to emerge in Europe and act as strategic evangelists of their product suite, with private equity as a key enabler of this vision.

Pillar I: ServiceNow as a Winning Platform

ServiceNow’s market leadership stems from its strength in ITSM and its ability to leverage that to expand into adjacent enterprise workflows. The Now Platform’s low-code and no-code capabilities allow users to quickly develop and deploy applications and is increasingly adding GenAI features to its platform.

ServiceNow is primarily an enterprise-focused product, serving a select 8,100 customers, including 85% of the Fortune 500, and achieving an impressive 99% renewal rate. Its net expansion rate stands at 125%, and two-thirds of its customers increase their spending year-over-year. Broker consensus forecasts expect ServiceNow to maintain growth comfortably above the 20% range, underlining its bright outlook.

Pillar II: The Synergetic Relationship with Partners

The success of the ServiceNow platform hinges on its ecosystem of partners, which play a critical role in implementation and value creation. The services-to-software spend ratio is approximately 2:1, and nearly all these implementations are delivered by partners. We estimate that the size of the European partner ecosystem is roughly €5.3 billion. Partners generate most of their revenue from time-and-materials (T&M) implementations, while managed services and reselling typically contribute less than 20% of net revenue.

ServiceNow views its partners as co-creators of value. Erica Volini, Senior Vice President of Global Partnerships, highlighted their vision of partners as "co-pilots on our journey to becoming the platform for digital business."

This is substantiated by:

• ServiceNow Increasing Investments in Partners: ServiceNow has tripled the number of partner incentives from 2024 to 2025 in terms of both dollars and time.
• Increasing Partner Contribution: Partner-sourced annual contract value for the ServiceNow platform has risen from 8% to 20% in just two years.

Avenues for Partner Differentiation:

1. Proprietary IP: Building unique solutions on the Now Platform optimizes service delivery and enhances customer outcomes.
2. Industry-Specific Expertise: Verticalized domain knowledge has a meaningful impact on daily rates, tender win rates and customer stickiness.
3. Deep Platform Knowledge: Enterprise customers demand partners with comprehensive capabilities to address needs across the ServiceNow portfolio.

Pillar III: The Need for Pure Play Consultancies of Scale

The European ServiceNow partner ecosystem is dominated by large Global System Integrators (GSIs) and a small number of specialized pure-play ServiceNow consultancies. While GSIs often prioritize other ecosystems, such as SAP or Salesforce, due to their higher services-to-software ratios, pure-play consultancies serve as true evangelists for the ServiceNow platform, driving its land-and-expand strategy. Recognizing their critical role, ServiceNow is actively supporting their growth.

Currently, fewer than 10 pure-play consultancies in Europe have more than 100 ServiceNow-certified FTEs. Many have been acquired by platform-agnostic system integrators, leaving only a limited number of independent providers with significant scale. ServiceNow is enabling their growth through:

• Preferential treatment from a sales and marketing perspective.
• Changes to the partner program to reduce the number of partners qualifying as "Elite," strengthening their differentiation.
• Actively encouraging partnerships with private equity funds, which ServiceNow sees as enablers of:
  • Driving operational excellence to meet the sophisticated requirements of enterprise customers.
  • Facilitating ecosystem consolidation, as demonstrated by ServiceNow’s investment arm Ecosystem Ventures, where it co-invests alongside private equity in strategic partners like Plat4mation, for example.

Smaller or platform-agnostic providers are likely to lose market share, as they often lack the comprehensive capabilities needed to secure major enterprise contracts and are increasingly de-prioritized by ServiceNow. Initiatives such as Iconica underscore the challenges these smaller providers face. This network of boutique ServiceNow consultancies seeks to address these gaps by pooling ServiceNow resources across member firms, enabling them to better meet customer requirements and win new logos.

Addressing Pain Points and How Volpi Capital Can Help

Despite the ecosystem's potential, many partners struggle to grow at market rates. Top-quartile ServiceNow partners grow at +25% annually, generate 40-55% gross margins, 15-20% EBITDA margins, chargeability of 70%, and blended daily rates exceeding €950 (in Western Europe). However, many partners underperform due to challenges in scaling operations and winning enterprise contracts.

At Volpi Capital, we believe we can help ServiceNow partners by:

• Scaling Delivery Teams: Establishing HR Centres of Excellence to build a mature HR organization with recruitment best practices, including in-house academies independent of ServiceNow.
• Strengthening GTM Strategies: Leveraging our operator network and relationships within the ServiceNow ecosystem to ensure partners can capitalize on the platform’s full potential and follow best practices.
• Pursue Buy and Build Strategy: Only ServiceNow partners of scale will succeed over time. We have a pre-qualified list of targets that we have met and can help companies execute buy-and-build strategies effectively.

We’d love to hear from you.

Whether you are a ServiceNow partner looking to take advantage of these opportunities, or simply have insights to share, we would love to hear from you!

You can reach out to Fernando Piekenbrock (fernando@volpicapital.com) and/ or to Marc Andreoli (marc@volpicapital.com).