The lesson from the ServiceNow ecosystem consolidation

The last 12 months have seen a period of massive consolidation rip through the partner ecosystem of service management and workflow platform vendor ServiceNow.

This week, Accenture announced it had acquired the one of the largest ServiceNow partner in Germany – solid servision - having previously acquired Canadian partner Nashco in November 2016.

It is not the only one of the IT services majors ramping up in this area. CSC claims to be the world’s largest ServiceNow integrator following the purchase of Europe’s Aspediens, Chicago-based Fruition Partners and UXC Keystone in Australia.

More recently, Fujitsu paid an undisclosed sum at the end of last year to snap up Symfoni ESM, which brought a team of 80 ServiceNow into its ranks in Northern Europe.

It is easy to see why so many it services firms want to ally themselves with ServiceNow. The company’s full-year 2016 numbers featured a 38% rise in revenue to $1.4bn including a 44% rise in subscription revenues, as it cements its position as the preferred service management platform in the cloud era.

But the big lesson here is how IT services companies are being forced to adapt their M&A strategies in order to build scale around hot areas of the market. Ten of fifteen years ago, it would have been possible for a company to become a major player in SAP, Oracle or Microsoft services in a single swoop. The maturity of the partner ecosystems around these vendors meant that one acquisition could bring several hundred experts around these topics.

However, to become a leader in areas such as ServiceNow – and we have also see this trend play out across the Salesforce integrator community - companies have to work much harder to string together a number of targets as most of the available ones are relatively small in stature (typically <100 employees).

The smaller the target, the less the potential impact on the wider organization, and the greater risk that the loss of a handful of key stakeholders will leave a take much of the inherent value of the business with them. It is of course even more challenging to recruit hot, specialist skills on an organic basis, but an effective M&A engine and approach to integration is going to be key if the established order are going to make rapid gains in these areas of the market.