Will AI Shakeup ServiceNow’s Business Model?

ServiceNow is one of the biggest enterprise software companies in the world, with a 97% renewal rate across more than 8,000 organizations. It built its success by using a channel sales strategy (relying on reseller and implementation partners) and modernizing an old IT tool called CMDB (Configuration Management Database). CMDBs have been around since the 1980s and are used to track IT assets, dependencies, and configurations. In 2019, ServiceNow launched its own upgraded version, called Service Graph, to strengthen its grip on the enterprise market.

But ServiceNow didn’t stop at IT service management (ITSM). It expanded into HR, security, finance, and customer service workflows—and in the process, grew annual revenue from $3.5 billion to nearly $11 billion.

The Problem: AI Could Disrupt Their Entire Model

Despite its dominance, ServiceNow has a big challenge ahead. The way businesses handle IT operations is changing fast, and AI is at the center of it. ServiceNow knows this—they even acquired an AI research team (Element) in 2020 and have been adding machine learning (ML) to improve their software.

However, like Google with Search, ServiceNow is at risk of being disrupted by AI-first startups because of these key reasons:

1. AI Can Automate CMDB Management

Right now, keeping a CMDB updated is a manual, time-consuming task that often leads to bad data. But AI can read system logs and automatically resolve IT issues, even before a human files a ticket. This means a new AI-first company could offer an automated CMDB, making ServiceNow’s existing model less necessary.

2. Their Reseller Network (Channel Sales) Limits AI Adoption

Over 2,200 companies resell and implement ServiceNow, driving 90%+ of its revenue. But if AI-based IT automation tools take off, smaller, lean AI-driven agencies could replace traditional IT service providers. ServiceNow can’t afford to cut out their resellers, so they’ll have a harder time competing against AI-first competitors that don’t rely on a big reseller network.

3. Limited Third-Party Integrations

Unlike Salesforce, which has a huge ecosystem of apps built around it, ServiceNow is more self-contained—it prefers customers to use its own built-in tools. This has helped it keep more control over its market, but it also makes it harder for startups to build on top of it. AI startups may be able to offer more flexible solutions that connect more easily to a company’s existing tools.

4. AI Encourages Pay-As-You-Go Pricing

Many businesses are moving toward consumption-based pricing—only paying for what they actually use. ServiceNow, like many legacy enterprise software companies, relies on fixed pricing models. AI-first startups may offer cheaper, more flexible pricing that appeals to cost-conscious businesses.

5. ServiceNow’s Expansion Areas Are Vulnerable

ServiceNow has been expanding into HR, finance, security, and customer service, but these areas aren’t tied directly to its core strength: IT service management. AI-first startups focusing on specific verticals (e.g., AI-powered HR automation) could win customers in these new markets before ServiceNow can fully adapt.

The Opportunity for AI-First Startups

This shift creates a huge opportunity for new AI-first companies. If founders understand enterprise IT and AI-driven automation, they can build more specialized solutions that outperform ServiceNow’s one-size-fits-all approach.

ServiceNow may be the second-largest SaaS company in the world today, but the rise of AI-first IT automation means its long-term dominance isn’t guaranteed. If startups play their cards right, they could carve out significant market share by offering faster, more automated, and industry-specific solutions that enterprises actually need.