Microsoft and ServiceNow are Integrating Their GenAI Offerings: What Customers Need to Know

During Knowledge 2024, ServiceNow and Microsoft executives announced an integration between ServiceNow’s Now Assist and Microsoft’s Copilot for Microsoft 365 that will be generally available in the fall of 2024. These products are each respective vendors’ GenAI offering.

ServiceNow’s VP of Product Management, AI, and Innovation, Dorit Zilbershot stated that the integration would bring:

“The power of two Generative AI systems into one seamless experience… creating a more holistic, connected experience, that allows employees to get the help they need, regardless of which platform they’re in.”

Now Assist and Copilot for Microsoft 365 will interact with one another to help employees execute common productivity tasks. The intelligence of the Now Assist AI-powered workflows will be integrated with Microsoft Copilot’s functionality to get the most relevant GenAI assistant, regardless of which platform employees are using.

As part of the announcement, ServiceNow’s Chief Operating Officer, CJ Desai, stated:

“We strongly believe that the next shift in Generative AI will result from the collaboration of industry leaders putting AI to work for their customers. We’re on our way to bringing the best of both worlds with the combined power of Now Assist and Microsoft Copilot to transform how work happens.”

ServiceNow and Microsoft have been strategic partners since 2019, and since both vendors have put GenAI tools on the market recently, it was only a matter of time before they announced a joint effort to push adoption for Now Assist and Copilot for Microsoft 365,

Here, I will discuss what the integration means for both ServiceNow and Microsoft customers, what customers can expect from ServiceNow and Microsoft moving forward, and how to navigate your future ServiceNow and Microsoft negotiations if you’re interested in adopting either or both GenAI products.

What Does the Integration of ServiceNow Now Assist and Microsoft Copilot 365 Mean for Customers?

For many organizations, you are already a Microsoft and likely a ServiceNow customer as well. At the very least, you are thinking about becoming a ServiceNow customer. If that is the case, you can expect to be caught in the middle of aggressive sales tactics from both vendors to drive adoption of Now Assist and Copilot for Microsoft 365.

Here is what you can expect from each individual vendor:

What to Expect from ServiceNow?

There is no question that even before this announcement, ServiceNow’s sales reps were pushing hard to get customers to upgrade to Pro Plus, the ServiceNow product that houses the Now Assist GenAI functionality. This was made clear by the amount of times “GenAI” and “Pro Plus” were mentioned during ServiceNow’s recent Q1 FY24 earnings call

ServiceNow needs to show customer adoption and use of Now Assist via Pro Plus to:

• Establish themselves as a leader in the GenAI space
• Increase their ARPU (Average Revenue Per User)
• Increase their customers’ Annual Contract Value (ACV)

Regarding increasing ARPU and ACV, during ServiceNow’s recent Financial Analyst Day before Knowledge’s official kick-off, ServiceNow told the investment community that the realized price uplift tied to moving customers from “Pro” to “Pro Plus” is greater than 30%. That is a pretty big uplift to customers’ spend and ever important ACV.

That’s why it is critical that customers start preparing to have discussions with their ServiceNow reps about what adopting Now Assist and upgrading to Pro Plus would look like. These discussions should include how you can leverage established ServiceNow’s goals and the new goals tied to the integration with Copilot for Microsoft.

At this moment, ServiceNow is focused on the products where the Pro Plus upgrade is available (ITSM, CSM, Field Service Management, HRSD). ITOM and SPM will be added to the mix “H1 2024” followed by SecOps, Contract Lifecycle Management and Source-to-Pay coming “H2 2024.”  Look at this as the Pro Plus attack plan.  If you have any of these products, your ServiceNow sales rep is going to be pushing adoption as soon as they can.

What to Expect from Microsoft?

Microsoft will continue to be focused on aggressively pushing Copilot because they want their customers to adopt and utilize their AI technology across the board. They want to position themselves as an AI leader in the market, something we’ve been seeing from Microsoft since they announced their partnership with OpenAI. The more customers that they can show have adopted their Copilot offerings, the more they can substantiate their investments and accelerate revenue.

Like ServiceNow, Microsoft is also trying to expand and grow their customers’ ACV. Microsoft sales reps need to make each customer’s annual spend go up. They need to do their part to ensure the “Land and Expand” goal is met.  Adding $30/u/m (the cost of Copilot for Microsoft 365) to an already pricey bundle of Microsoft 365 products does just that pretty efficiently. For those customers that have already jumped on the ServiceNow Pro Plus train, you can expect Microsoft to target you and lean on the integration to get you to adopt Copilot for Microsoft 365.

How to Navigate Your Microsoft and ServiceNow Negotiations

With the Now Assist and Copilot for Microsoft 365 integration, you are going to be hit with a unified message from both of these vendors. However, there is no question that Microsoft and ServiceNow will not let the integration get in the way of winning their individual deal for their respective AI offerings.

The following tips can help you achieve a competitive deal if you are considering adopting both ServiceNow and Microsoft’s GenAI products:

1. Play Microsoft and ServiceNow Against Each Other – If there is interest in both Now Assist and Copilot for Microsoft 365 as well as the potential benefits of integrating the two, it will be critical that you orchestrate the conversations with both effectively. For example, if Microsoft is unwilling to lower the price tag for Copilot for Microsoft 365, tell your ServiceNow sales rep that unless Microsoft lowers the cost, there will be no money for a Pro Plus upgrade. This goes the other way around, too. Ultimately, there is a unique and potentially beneficial path forward for customers to increase leverage through effectively playing Microsoft and ServiceNow against each other.
2. Negotiate Renewal Term Price Protections – It will also be important to not only obtain the right upfront pricing and discounting but also the right long-term price protections. You need to get assurances from both Microsoft and ServiceNow that any discounting offered is not made up for downstream by way of in-term and renewal term price protections.
3. Investment Dollars – Customers should also ask for investment dollars from both ServiceNow and Microsoft to help them roll out Copilot for Microsoft 365 and Pro Plus/Now Assist to ensure you receive the proper value from these products. There will also need to be training to ensure the AI features are being utilized properly. ServiceNow and Microsoft should be pushed to step up and provide meaningful funding to help unlock the full expected value from each of their respective AI offerings but also from the integration.

The bottom line is that tackling the sales tactics of one vendor is never an easy feat – let alone two major vendors coming at you with a devised and unified plan of attack. In order to secure the best deal possible, you have to come to the negotiation table with a well-thought-out strategy in place.

UpperEdge helps clients navigate aggressive vendor sales tactics every day arming them with the right strategy and insights to ensure the right deal gets put in place Explore our ServiceNow and Microsoft Advisory Services to see how we can help.