Automate Or Die: Why IT Services Automation Is Critical For Channel Success

After seeing the overwhelming response of customers to the game-changing, self-service IT platform known as ServiceNow, Chris Pyle knew that he had to make a big bet on the technology.

Pyle, who as CEO of Champion Solutions Group has been early to the party for many of the big technology changes over the past three decades, said the ServiceNow platform represents a “consumerization” of IT services, a paradigm shift that requires the channel to respond in full force. That’s why Boca Raton, Fla.-based Champion Solutions Group last fall acquired SystemiC—a Madison, Wis., IT consultant that has developed its own breakthrough security and patch management solution for ServiceNow.

“What ServiceNow is trying to do is really simplify IT,” said Pyle in describing the phenomenon that has solution providers building ServiceNow practices at a breakneck pace. “What ServiceNow is really doing, if you think about it, is they are ‘consumerizing’ IT. They are just making it uber-easy for end users within organizations to communicate and collaborate with IT. They are making things more self-service, more consumer-friendly.”

Call it IT services automation mania. ServiceNow is at the vanguard of a new wave of enterprise IT services management platforms that are replacing manual IT processes which previously took teams of people hundreds of hours to complete. The new services management tools are bringing dramatic productivity gains in everything from end-user and infrastructure provisioning to IT event management, and services delivery in areas like sales and human resources.

The new end-to-end IT services tools are impacting every segment of the enterprise market—shredding apart the time-honored services utilization benchmark for channel success. In its place are IT services automation platforms and tools that are allowing solution providers to scale as well as drive revenue per employee at a rate that was heretofore unimaginable.

It’s all about reducing IT labor costs by an order of magnitude in the digital transformation era. It’s a move away from purely people-delivered solutions to software-delivered automation of infrastructure. Solution providers are not only selling these new tools to enterprises, but also using them themselves to transform into strategic service providers running and managing critical infrastructure for customers.

Solution providers said their very survival depends on just how successful they are at automating once-arduous and costly IT tasks for customers. It is a case of “automate or die.”

“We’re betting our business on ServiceNow,” said Marco La Vecchia, executive vice president and general manager of MSPWorx, an Ottawa, Ontario-based ServiceNow MSP that also uses the enterprise services platform itself. “We feel like it’s the future of our business and our company in terms of the direction that we want to go, just basically riding the ServiceNow wave. We feel there’s a massive opportunity. Plus, it’s a phenomenal solution.”

MSPWorx, a division of CareWorx Fully Managed, has developed an OEM ServiceNow solution for businesses with between 1,000 and 5,000 seats called Grand Central, which La Vecchia said has exceeded expectations every quarter. MSPWorx also has launched an MSPWorx Partner Program targeting elite MSPs, ServiceNow implementation partners and global systems integrators.

ServiceNow CEO John Donahoe recently told investors that the Santa Clara, Calif.-based company’s platform is now being used by 75 percent of the Fortune 500. ServiceNow also just finished its best year on record with annual revenue of $2.60 billion and is projecting up to 34 percent year-over-year growth in 2019.

Donahoe said that ServiceNow is focused on its partner channel in 2019 and in October hired Dave Parsons, senior vice president, global alliances and channel ecosystem, away from VMware.

“Our line organization is now embracing partners, recognizing you can’t get to digital transformation with just software, just a platform,” Donahoe told investors during the company’s after-the-bell earnings call Jan. 30. “You need a really strong partner to help re-engineer the processes and ensure the implementation is done in a high-quality, out-of-the-box manner. Partners are very important to our success, and we’re going to continue to get better and better at making sure we operate strategically and effectively with them.”

The company would not disclose to CRN how much of its product is moved through the channel versus direct. In a filing with the U.S. Securities and Exchange Commission, ServiceNow had previously described its sales apparatus as “direct sales team and, to a lesser extent, indirectly through resale partners and third-party referrals.”

ServiceNow partners told CRN that solution providers can make 15 percent to 30 percent margins reselling licenses, and the company offers partners a chance to make money on services revenue in the form of implementations.

But incentives and margins are not the only way partners are using ServiceNow to make money.

MSPs such as 1901 Group are using it themselves to drive better results. Reston, Va.-based 1901 Group—which does most of its business in the federal space—called ServiceNow a “foundational technology” for its FedRAMP authorized managed service platform In3Sight.

Brendan Walsh, senior vice president of partner relations at 1901 Group, has seen the benefits of the heavy investments ServiceNow has been making in multi-cloud and hybrid cloud management, including workflow authorizations, auto-provisioning and orchestration to help MSPs use the cloud more efficiently for their customers, what he called “elastic engineering” around cloud usage.

“It is part automation, and it’s part oversight or administration where talking to your customer, understanding their needs, whether it’s weekend, after-hours, what is the reality of the access they need to this capacity, and spinning up, spinning down,” said Walsh. “It seems like such a simple thing, but if you’re not paying attention to spinning up and spinning down, the cloud will be very costly. And if the cloud is costly, that really is not good for anybody.”

What ServiceNow itself is doing with its platform is tying together all the critical elements of a next-generation digital workforce from human resources to customer service and bringing them all together into IT as the central nervous system of a digitally empowered, self-service IT organization.

“The whole concept of the company is to make the ‘world of work’ work better for people,” said David Wright, chief innovation officer at ServiceNow. “It’s about looking at everything that people do and trying to imagine how we could do that in a better way. So it’s about giving people the capability to analyze the current way they work, understand where they’ve got anomalies, understand outliers, and then be able to build the machine-learning algorithms to be able to take some of the mundane stuff away.”

For 1901 Group’s Walsh, the “modularity” of the product was a big differentiator when the company selected ServiceNow as a partner six years ago, switching from a rival IT service management product that was what he called unacceptable.

“You could almost write scripts for ServiceNow using a logical approach, instead of having to use, say, proprietary scripting and code,” he said. “It was more user-friendly. It allowed us to implement ServiceNow across multiple customers very quickly.”

Partners say the ServiceNow platform has become table stakes for them, providing managed services in midsize and enterprise organizations that are implementing far-reaching, digital transformation initiatives.

“We are implementing some of the most complicated ServiceNow implementations in the federal space,” Walsh said. “Our work, we’ve been told, has as many modules and the most complexity that ServiceNow has been selling within the public sector.”

Impressive as that sounds, Walsh said successful MSPs face a “Day Two” scenario with the “care and feeding” of the ServiceNow customer post-sale.

“It’s not just on-boarding a new client,” he said. “How do you bring a new service? How do you deliver the new services? How do you use things like elastic engineering to spin up servers and then spin down servers when they’re not being used? So we look at automation more from a life-cycle approach. Not just the front end. … I know it sounds sort of silly, but if you have repetitive events—and we’ve got dozens, hundreds, even thousands of tickets—reducing a ticket response resolution by 5 or 10 seconds, let alone 30 seconds to a minute, that really compounds, so that we can grow our revenues faster than we’re increasing our costs. That’s the rubber hitting the road.”

Champion Solutions Group’s Pyle said the company, which ranked No. 194 on the 2018 CRN Solution Provider 500, is at the forefront of the IT services automation revolution—helping customers realize the “IT services dream” that is driving ServiceNow adoption.

“Customers need companies like us to help them adopt it, consume it, and ultimately to unleash the business value of ServiceNow,” he said. “We are making the right strides to be one of those channel leaders.”

Pyle isn’t alone. Many solution providers, including some of North America’s largest, are buying ServiceNow-focused companies because it is just too costly to start from ground zero and build out the ServiceNow capabilities.

DXC Technology, for example, No. 10 on the 2018 CRN Solution Provider 500, has gone all in on ServiceNow with the acquisition last November of two leading ServiceNow partners, while global solution provider behemoth NTT Data last November acquired Sierra Systems Group, a Canada-based ServiceNow partner.

David Powell, chief revenue officer for New York-based Corsica Technologies, a next-generation, private equity-backed managed service provider, said he sees the IT automation trend as a means to scale without significantly increasing labor costs.

“The really successful MSPs are embracing automation,” he said. “The struggle with most MSPs is when they bring on a new customer, they have to hire support staff. The way to bring on more customers and not hire new people is through automation. It’s about things like automating remediation and on-boarding.”

Powell said the automation phenomenon is changing the underlying economics of MSPs of all stripes, driving up the EBITDA (earnings before interest, depreciation and amortization) for the most automation-savvy partners—who are moving to best-in-class automation toolsets.

Ultimately, the MSPs that go into automation overdrive will thrive, while those that don’t will either be acquired, languish or go out of business, according to Powell. That’s because the automation-savvy solution providers will be delivering a better customer experience with fewer people, putting pressure on MSPs that are simply throwing more people at perennial IT support issues, he said.

“The MSPs that do not automate will simply not be able to keep up with those that do automate,” said Powell. “To me, it comes down to automate or die.”

ServiceNow is only one avenue to automate the tasks that heretofore would have been done by storage, network or server administrators. The key measure in the IT services automation equation is just how much does it reduce IT labor costs and make customers more competitive in an era where every company must digitally transform their business or risk being “Ubered” out of business like the taxi industry.

“We get excited about a lot of stuff, but the reality is only a couple things have the potential to change our life, fundamentally change the life of how IT works every day and how the business works every day,” said former NASA flight design manager Kevin Smith, now a senior vice president with IT services automation software provider Ivanti. “You really have to say that automation is on that very, very short list.”

Born from the January 2017 merger of LANDesk and Heat Software, Salt Lake City-based Ivanti has more than 1,700 employees in 23 countries and 78 clients among the Fortune 100. The majority of the company’s revenue moves through the channel, and includes national solution providers like CDW as well as smaller, vertically focused partners, said Reza Parsia, vice president of channel sales for Ivanti.

“We know each of these partners has different strengths and focuses on different things, and we’re seeing tremendous success and growth in all of them,” Parsia said. “We were up double digits in our channel growth in 2018. We’re seeing an influx of growth there.”

Smith said recently that the CEO of a well-known MSP challenged Ivanti to compress client on-boarding from 30 days to one day using automation tools.

“Their business model today in on-boarding a new client is 90 percent manual. It is brute force. And they can’t scale doing that because they can’t hire people fast enough. And it’s too expensive,” he said. “We believe it’s doable. It is doable because there are huge chunks of time in that timeline, stuff that takes three days today can be done in 30 minutes with automation.”

By 2024, 90 percent of the tickets that come through IT will be automated, Smith said, including service requests. “And that fundamentally changes everything,” he said.

For ServiceNow’s Wright, the once-experimental ideas of artificial intelligence and automation are moving into the workplace because of the scale of data that IT professionals are forced to handle just to compete in today’s environment.

“Eventually you’re going to get a problem where you can’t just fix it by throwing more people at it,” he said. “Where it’s just going to be too much data for people to handle. So you need a way to be able to filter out the noise to allow the company to be able to optimize and maximize on where it’s going to get its best return from a business perspective.”

Dell Technologies is providing that kind of return on a grand scale with VMware and Pivotal, driving a blizzard of IT automation offerings such as VMware’s vRealize cloud management suite and Pivotal Cloud Foundry.

Hewlett Packard Enterprise, meanwhile, has changed the economics of storage with its HPE InfoSight AI predictive analytics software platform. HPE said that InfoSight is driving down storage operational costs by as much as 79 percent with 86 percent of issues automatically predicted and resolved before a problem is identified.

Cisco Systems’ AppDynamics application monitoring business unit recently unveiled its Central Nervous System for IT—a strategy that drives automated actions across applications, cloud or premises-based infrastructure, and the network.

Pyle, for his part, said he couldn’t be more optimistic about Champion Solutions Group’s future given its big bet on ServiceNow. He calls ServiceNow one of the biggest technology shifts he has seen in 32 years in the business. “We are very excited about the opportunity that sits in front of us,” he said. “Our pipeline is full. We have a huge backlog of services opportunity and we are excited about the intellectual property that we are developing that we are going to be taking to market in a very short period of time.”