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ServiceNow Strategy

How ServiceNow Automation Will Both Kill and Save Outsourcing

I’ve been hearing from our clients and prospects that ServiceNow is changing their outsourcing relationships. Some clients are even mandating that their outsourcer use ServiceNow for both ITSM and automation, citing the technology’s best-in-class ITSM[1] status and major realized cost-savings as reasons for the change.

Here are just a few comments that have surfaced in recent client discussions:hires-33745119

“We are using ServiceNow as the backbone of our Global Operational Function.  It has changed the dynamic of our relationship with our outsourcer – we need less people, less manual work” – Global Medical Device Firm

“We are mandating the use of ServiceNow and pressuring our outsourcer for increased automation with ServiceNow” – Global Food Chain

These new contractual obligations are fundamentally shifting some of their longstanding outsourcing relationships. In this article, I’ll explore a bit on what I think this shift will likely bring to the space.

The Evolution of IT Outsourcing Best Practices

ITSM so far has been served by adoption of ITIL and ISO/IEC 20000. These best practices and standards are used by most, if not all, outsourcers to improve IT service management. In addition to lower cost, outsourcers also generally tout other benefits, such as the idea that moving to outsourcing gives you a better process than you likely had before you outsourced.

Suddenly ServiceNow has entered the scene — not only codifying and improving processes —  but also automating them. ServiceNow applications dramatically simplify the ability to automate areas like password reset and cloud management. Once ServiceNow is implemented, much of the work outsourcers do manually gets automated.

This technical advance is having a deep impact on outsourcing relationships – shifting their size, tenure and nature. We are seeing more project-based work in the outsourcing relationship to automate specific areas – thereby removing some of the heads and cost of the overall outsourced relationship.

Next Generation IT Outsourcing

It’s common place for outsourcing contracts to require the outsourcer to drive 5% -10% efficiency every year (usually after the initial transfer from client to outsourcer has happened and service levels have stabilized.) In traditional outsourcing, that material benefit usually translates to a headcount savings: as everyone gets better at their jobs, a task that took an outsourcer 100 people in Year 1 takes only 90 people in Year 2.

Unfortunately for outsourcers, single digit efficiency improvements really aren’t enough today. One of our clients requires 30% efficiency improvement annually. And that kind of change happens only with automation.

We see massive challenges today as many outsourcers don’t have the ServiceNow experience or talent to do this automation on behalf of clients, so the outsourcers are partnering, buying[2], and working alongside expert ServiceNow consultancies like Acorio to deliver the automation and savings to clients.

How To Raise Your Outsourcing Expectations

In light of new ServiceNow technology, firms with legacy support contracts have a unique opportunity to rethink outsourcing relationships and the value they’re delivering.

In evaluating your outsourcing contracts, start by asking these kinds of questions about your deal:

  • How much automation is my outsourcer bringing to me?
  • What parts of ITSM can ServiceNow replace in my outsourcing contract?
  • Does my outsourcer have the necessary skill to automate more than it has done so far or do I need to bring in another partner specifically for ServiceNow expertise?
  • If I automate ITSM with ServiceNow, what other services can my outsourcer and other consulting partners bring to create new value based on the service management automation?

At Acorio, we’re committed to ServiceNow and what it can do for our collective customers and the industry.  Firms who decide to deliver services via outsourcing contracts will be pressuring outsources to both use ServiceNow but also focus more on automation with ServiceNow.

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[1] See Magic Quadrant for IT Service Support Management Tools. Link

[2] CSC bought the largest dedicated ServiceNow partner, Fruition Partners in 2015 (reference:http://www.csc.com/newsroom/press_releases/133905-csc_finalizes_fruition_partners_acquisition)  and has stately publicly its intent to acquire Aspediens, a European consultancy with a rich ServiceNow practice.  http://www.csc.com/newsroom/press_releases/138028-csc_finalizes_acquisition_of_aspediens_to_expand_its_position_as_a_top_servicenow_integrator