ServiceNow Impact Negotiations: Key Contract Terms for Enterprises

Earlier this year, ServiceNow announced its latest offering, ServiceNow Impact.  Offered as a multi-tiered, add-on product to your ServiceNow portfolio, Impact is a new tool designed to help customers get more value from their current ServiceNow subscriptions.

ServiceNow CEO Bill McDermott described Impact as a “command center to navigate the fully connected world.”  He defines Impact as an “intuitive, consumer-grade mobile application that visualizes the value from transformation investments in real-time.”  Impact is said to be personalized to help boost your expertise and drive faster ROI with options to have your own Impact Squad, a group of hand-picked operators who work alongside you to take on your team’s unique transformation challenges.

ServiceNow Impact is currently offered through four different tiers:

• Base Package: Free to every ServiceNow customer, the base package provides web-based support and curated content.
• Guided Package: An entry-level offering that provides 24/7 support, an Impact Squad customer success manager, curated content, and other offerings.
• Advanced Package: A more inclusive offering that gives access to the full Impact Squad, tech support tools, an adoption toolkit, curated content, training credits, and other offerings.
• Total Package: The most robust, complete Impact solution with dedicated experts, development support, advisory sessions, tailored guidance, and other offerings.

Impact continues to play a major role in ServiceNow’s goals and objectives.  Here, I will discuss why Impact is important to ServiceNow’s overall goals, how they are selling Impact to customers, and what these customers can do to leverage Impact at the negotiation table and ensure they get the best deal possible.

How ServiceNow Benefits from Impact

McDermott has stated that while Impact is intended to deliver value to customers and act as a tool that benefits customers, Impact will also help ServiceNow in ways that are important to them and their goals as a company.

As an add-on product, Impact can help increase upfront and downstream revenue because Impact’s price is derived from a percentage of your overall ServiceNow product spend.  Since Impact is added on to your product portfolio, it is going to be tethered to your other product usage and, if it is driving value, it will need to be renewed.  As you add more product overtime, this price and revenue stream goes up as well.

Additionally, Impact will speed up user adoption, leading to a “halo effect” that broadens customer’s solution portfolios.  If ServiceNow can accelerate user adoption and make the solution more entrenched in their customers’ portfolios, that is a significant win.

ServiceNow continues to grow and expand their portfolio set so they can show user adoption of other products.  The approach that you should take as a customer to adopt other products becomes even easier, and the more products you add to your portfolio, the more revenue for ServiceNow.

ServiceNow’s Strategy for Selling Impact

Impact continues to be discussed by ServiceNow executives, including at ServiceNow’s Financial Analyst Day and their annual Knowledge Conference.  Unsurprisingly, these discussions have also been brought to the negotiation table for current and prospective ServiceNow customers.

As the year has progressed, ServiceNow has made it clear that they are aggressively pushing their current clients to incorporate Impact at their renewals and net-new clients to bundle in Impact from the start of their contracts with ServiceNow.

There are several things that ServiceNow pitches around Impact.  Impact is marketed as an AI-powered personal, digital experience with premium support in tools, personalized learning and coaching, and access to an “Impact Squad” to support you in your product and service objectives.

You have multiple packages to choose from based on your company’s needs, with a base package that is free for ServiceNow customers to try.  ServiceNow is promising major value from Impact, but it is critical that current and new customers determine whether that value is actually needed in their product portfolio.

How ServiceNow Customers Should Negotiate Impact

First, customers need to understand how the fees for Impact are derived and what this means for their inevitable negotiations.  Impact’s fees come from a percentage of what you pay for all your other ServiceNow products and services.  In other words, ServiceNow determines the cost of Impact for your organization based on a percentage of your Annual Contract Value (ACV).

The problem with this payment model is that the amount you end up paying for Impact will not map to the value you receive from the solution.  This is because the monetary value is based on other products and services from ServiceNow rather than on Impact itself.

Because of this ACV percentage model, there are several things that every ServiceNow customer needs to work through before making the commitment to Impact:

1. Transparency: Request that ServiceNow provide explicit insight into the percentage that you need to pay to add Impact to your portfolio. The exact dollar amount they propose for Impact is not as useful as understanding what percentage of your ACV is being used to determine price.
2. Credits: Negotiate one-time credits that can take a certain dollar amount off the cost of Impact over a certain period while your company determines whether the product is a value add. Impact is a brand-new product, so your company will want to spend some time getting to know if and how it can add value to your company without increasing your costs.
3. Lower Product Spend: Because Impact’s price is based on a percentage of your ACV spend, you will want to advocate for a lower overall product spend to help lower the price of Impact.
4. Future Price Protections: For most organizations, it is inevitable that you are going to have to increase the number of products and users in your portfolio from your initial purchase. When negotiating with ServiceNow, make sure to establish the future percentage of ACV that will be applied when you inevitably increase your number of users, especially if you spent time negotiating a lower upfront fee.
5. Renewal Protections: You also want to ensure you negotiate price protections come renewal time. Renewals often come with price increases to your overall product spend, so you want to ensure that your renewal rates don’t increase too much to keep your Impact payment down.
6. Flexibility: Even if ServiceNow gives you the above terms when you start using Impact, you may still find that it isn’t a value add for your company’s objectives. You want to ensure that you are given the flexibility to drop Impact before your renewal or at renewal without an overall impact to your product spend.
7. Fixed Upgrade and Downgrade Percentages: Because ServiceNow Impact is offered in various tiers, you want to make sure you put language into your contract that says you can upgrade Impact tiers at a predetermined percentage. This way, you can plan and budget for potential upgrades when the need arises at your organization.  The same goes for downgrading to a lower tier than what you currently have.  You want transparency into what the fees are going to look like at each tier.

These terms are only scratching the surface of what you’ll want to think about if you add Impact on to your ServiceNow portfolio.  Additionally, the way you approach ServiceNow, how you deliver your message, and who you deliver your message to will affect what you leave the negotiation table with.

ServiceNow is and will continue to be highly focused on getting Impact adopted at renewal and during net-new deals.  You need to have the right arrangement and terms in place to ensure you get the most value out of Impact without significantly increasing your ServiceNow spend.

Our ServiceNow advisory services can empower you with data and insights that inform your negotiation and help you maximize the value you receive from ServiceNow.