Industry: Software Asset Management
Key Stakeholders: CIO, CFO, Chief Digital Officer, Chief Technology Officer, Chief Mobility Officer, IT Asset Directors and Managers, Procurement Directors and Managers, Accounting Directors and Managers
Why It Matters: Software-as-a-Service (SaaS) is now a strategic IT component. As enterprise SaaS doubles in market size over the next three years, this complex spend category will continue to expand beyond the ability to manually manage it
Top Takeaways: With this acquisition, ServiceNow will have a cutting-edge & converged Software Asset Management solution for both SaaS and on-premises applications in 2019. Enterprise organizations managing over $25,000 a month should consider an enterprise SaaS vendor management solution to optimize licenses, de-duplicate vendor categories, and gain enterprise-grade governance.
With ServiceNow’s acquisition of VendorHawk, the era of SaaS Vendor Management is emergent.
ServiceNow Acquires VendorHawk
On April 25th, 2018, ServiceNow announced its acquisition of SaaS Vendor Management solution VendorHawk in an all-cash transaction scheduled to close in April. This acquisition highlights the increasingly strategic role of SaaS from an IT service management perspective and validates the need for Software Asset Management solutions to support SaaS. In addition, this acquisition continues a string of acquisitions that ServiceNow has made over the past year including acquisitions of:
• Qlue, an artificial intelligence framework for customer service
• Telepathy, a design firm focused on massive adoption of applications
• SkyGiraffe, a no-code mobile app development platform used to make all ServiceNow applications mobile-friendly
The VendorHawk acquisition falls in line with these acquisitions in that VendorHawk will help enterprises to support the widespread adoption of SaaS.
Who is VendorHawk?
VendorHawk was started in 2015 by co-founders Patrick Lowndes, Brian Geihsler, and Ben Stephens. The company received a seed round led by iNovia Capital, and went through the Techstart Seattle 2017 class. Built to manage SaaS vendor relationships, Amalgam noted VendorHawk’s role as a leading SaaS management solution in this emerging category both our IT asset management and SaaS-specific management research.
VendorHawk’s partnerships with G2 Crowd and single sign-on solutions such as Okta provide deep sources of application access and visibility. With this acquisition, VendorHawk will be re-platformed onto the ServiceNow with the plan of providing this functionality in 2019 as part of ServiceNow’s SAM offering.
Who is ServiceNow?
Although ServiceNow doesn’t really need an introduction at this point for anyone who is savvy in IT management, ServiceNow was founded in 2004 and has quickly grown into the leading cloud platform for IT service management and is currently traded on the New York Stock Exchange under the symbol NOW. In growing to almost $2 billion in annual revenue, ServiceNow has become a necessary platform for IT asset and expense solutions to integrate with, since it has become both a repository and platform for service workflows and IT best practices.
Currently, ServiceNow expands its ecosystem through a variety of partner programs, its own investment arm of ServiceNow Ventures, as well as strategic M&A activity, such as the acquisition of VendorHawk.
Why This Acquisition Matters And What Does This Really Mean?
This acquisition helps validate several core assumptions about the role of SaaS in the enterprise.
SaaS is a core aspect of IT. SaaS provides enterprises with the opportunity to quickly augment existing platforms and automate new business processes without the need for extensive customization, enterprise-grade sourcing, or technical due diligence since the SaaS provider takes care of the infrastructure and security. However, this ease of implementation and use is countered by the fragmentation of vendors across a wide variety of markets and relative lack of standardization in SaaS billing, usage management, and license management.
The SaaS market will double from 2017 to 2020, resulting in a market of over $100 billion in annual revenue. As this market growth occurs, the opportunities for SaaS optimization, management, and augmentation to create value will continue to soar. However, to create and validate the ongoing business case for SaaS, enterprises must be able to manage and govern the cost, licenses, usage, employee access, and vendor relationships associated with SaaS.
SaaS is a vital part of Software Asset Management, but the majority of Software Asset implementations are poorly configured to manage SaaS well. Unlike traditional software management solutions focused on helping enterprises with software audits from the likes of SAP, Oracle, and IBM, SaaS management requires deeper discovery capabilities such as aggregating multiple accounts, integrating with Single Sign-On solutions rather than dealing with the impossible proposition of building software-specific integrations at the speed that apps are being created, and taking a user-specific approach to app management where the user, rather than the vendor, is treated as the locus of app usage.
Why did ServiceNow Make This Acquisition?
Amalgam covers over a dozen companies with SaaS-specific management offerings. However, of those, VendorHawk stands out as an appropriate acquisition for several reasons.
First, ServiceNow lacked deep SaaS-specific functionality in its current Software Asset Management solution. Although ServiceNow started providing Microsoft Office365 support starting with its Kingston release in January, the investment to build out SaaS support across all enterprise SaaS vendors would have been substantial. ServiceNow did not have an app partner on its platform dedicated to SaaS-specific management use cases. Perhaps the closest related company would have been MobiChord, an IT expense application on the ServiceNow platform, which does support SaaS subscriptions but mainly focuses on mobility and telecom service management.
Given the strategic importance of SaaS as a service challenge that is quickly scaling into its own IT management category and IT department, ServiceNow had to act now in picking one of the newest vendors in this space that had raised money (along with Alpin, MetaSaaS, SubCentral, and Zylo) and started to build out a defined platform.
Second, VendorHawk was still young enough that it could be re-platformed onto ServiceNow. Once a platform builds up to scale and starts to manage billions of dollars in spend across thousands of clients, it becomes very difficult to effectively rebuild the platform because the complexity of recreating the platform on another code base becomes untenable. ServiceNow had to pick a solution with a well-defined logic and functionality, but not a solution that had become internally convoluted. Undoubtedly, the consistency and relative cleanliness of VendorHawk’s platform would have been a positive for ServiceNow’s due diligence.
Finally, the ability to keep VendorHawk’s executive founders on board to guide the product forward was an additional bonus for ServiceNow. By focusing the VendorHawk team on the ongoing development of the SaaS Vendor Management product while adding a massive sales team from the ServiceNow ecosystem, ServiceNow saw the opportunity to maintain the culture and DNA of VendorHawk.
Expectations For the Future
Amalgam considers this acquisition to be an interesting one-off by ServiceNow in that this acquisition is supporting a specific product in the portfolio rather than enhancing the platform at large. Although ServiceNow always reserves the right to quickly acquire solutions in quickly growing areas and has made several acquisitions over the past year, ServiceNow’s recent modus operandi is typically to allow application developers to build on top of ServiceNow as a platform. This exception was driven by the specific looming opportunity for managing enterprise SaaS.
With this acquisition, Amalgam expects ServiceNow has looked at the Software Asset Management market and seen that there are few true options in the market. There are several sets of vendors that compete to some extent such as:
• Traditional SAM players such as Flexera, Aspera, and Snow Software. Although Snow has its Snow for Cloud offering, these on-premise software asset management leaders tend to focus on the challenges of on-premises software.
• The aforementioned SaaS specialists Alpin, MetaSaaS, SubCentral, and Zylo as well as Torii, Cleanshelf, PyraCloud, and others have appeared on the market to handle these expenses.
• Technology Expense Management vendors such as Calero, Cass, MDSL, MobiChord, Network Control, Sakon, Tangoe, and vCom that have traditionally focused on voice and mobility have also started to support cloud expenses as well.
However, none of these vendors has gained a large share of SaaS spend under management. Between the lack of an established SaaS expense market leader and the rapid expected growth of enterprise SaaS, ServiceNow sees an opportunity to manage billions of dollars in spend and add hundreds of millions of dollars in revenue in the process.
To fully open up this opportunity, ServiceNow may need a mobile partner to support app discovery on devices and cellular networks to add to the VendorHawk functionality. The key reason is that SaaS accounts can also start from mobile devices that may or may not be fully managed by a corporate entity. To gain full visibility to corporate devices Amalgam recommends working with a mobility services platform such as MobiChord, which has more than doubled in size year-over-year for several years based on its strong mobility and technology management capabilities on the ServiceNow platform. Another potential acquisition could be MobilSense, a wireless expense management solution that recently acquired mobile carrier data management solutions MobilePhire.
Recommendations for Optimal SaaS Management
For enterprise sourcing managers and IT managers, realize that SaaS is a rapidly growing and very dispersed spend category that will require complex spend management strategies. SaaS management is quickly becoming its own separate practice from traditional software asset management, much as wireless expense management separated itself from traditional telecom expense management a decade ago. To successfully get the 20-30% savings associated with optimizing the complex spend category of SaaS, Amalgam highly recommends using a SaaS specialist solution to manage enterprise SaaS spend once it starts to exceed $25,000 per month. After that point, the time internally spent on actively optimizing SaaS spend outweighs the cost of a third-party provider.
For VendorHawk customers, expect your user and service experience to be similar for the next year or so. ServiceNow’s policy is to replatform all outside applications, but this is not an immediate process. For instance, Qlue was acquired last May as a user interface, but the virtual chat agent has not been fully integrated into ServiceNow as of yet. Even post-platform change, the VendorHawk experience will most likely remain similar from a user experience perspective, with the most significant changes being increased integration and access to the rest of the ServiceNow platform. In the long run, this acquisition is most likely a net-positive for current VendorHawk customers, as it guarantees that their SaaS management will be running on a core enterprise cloud platform built for IT that will continue to experience significant investment over time.
For ServiceNow customers, expect a push towards Software Asset Management, especially post-platform migration when ServiceNow will be able to manage both on-prem software and SaaS software within the same platform. This acquisition is a significant step forward in ServiceNow’s maturity in handling the new world of hybrid asset management where nearly every IT asset is available either as an on-premises piece of equipment or a virtualized or cloud-based service.
The fact that VendorHawk has multiple funded competitors actually speaks strongly for the future of this market, as any mature market ends having several strong players competing for enterprise business and differentiating on their own merits. Amalgam estimates that less than 10% of enterprise SaaS is currently managed with a third-party solution, meaning that there is a massive opportunity both to manage existing spend and to support the upcoming doubling of SaaS spend as of 2020. And in the past year, the SaaS Vendor Management market has quickly expanded in quality, showing the increasing demand for solutions and maturity of this market.
With this acquisition, ServiceNow has guaranteed itself a seat at the table of market leaders in Software Asset Management in 2019 and 2020 and started what is likely to be a race by large IT and software asset vendors to either acquire or develop SaaS management capabilities over the next couple of years.