Once in awhile there is something that isn't only important coming out of the vendor community but actually kind of refreshing. Given my right-brained proclivities, I didn't think it would come from the world of contracts (that's a Ray Wang specialty), but interestingly enough it does.
RightNow, about an hour ago, released the details of its new Customer Service Agreement (CSA) which actually moves the discussion forward on how vendors should be thinking of charging customers - as a partner rather than as just a provider.
Here are the official terms:
Annual Usage Alignment Up or Down • Three Year Price Commitment Plus Three Year Renewal Price Cap • Annual Termination for Convenience • Annual Pools of Capacity • Cash Service Level Credits • Unlimited Capacity for 90-Day Pilots
What makes this most interesting is that you are no longer paying a per user subscription - you are paying for what you use. The more you use the more you pay. The less you use, the less you pay. There is a locked price for 3 years and if you renew can keep it at the same price for another three. All in all, this is a vendor that is moving the needle in the right direction.
Esteban Kolsky, one of the must-listen-to-analysts in the enterprise world put it this way:
"RightNow CSA is a step in the right direction. The promise of SaaS is that organizations can use what they need, paying for it, but not having to make commitments to more than that. Of course, the ultimate SaaS model of function-specific rental is not yet available, but it would be impossible to do that with the current pricing model. The inherited models we have in place from on-premise and the pricing by the seat are a far cry from a cloud-centric pricing model.
RightNow learned from their customers and simply the common wisdom of the customer into practice. The ability to try or pilot a real-time, live implementation for a few months without a long term commitment if it does not work is a very important aspect for larger organizations that can afford 4-6 months of fees as a test case – and it could easily translate into new license growth for RightNow.
There are two areas where I have some concerns.
First, how will this play out financially for RightNow — if their customers are no longer locked in, will they stay? And if they don’t stay, will the influx of new customers compensate them for the churn in their customer base? This is a, still, growing corporation and growth rates must be maintained. They are not a small company, so they can afford the temporary hit it could get from the changes, but how does it play in the long term?
Second, I want to see the impact in other vendors — not specifically on-demand or SaaS vendors— but on-premise vendors. If this model works it will be a revolution in the industry. Alas, I don’t think it will take hold in other vendors or other licensing or pricing models. Should be noted that companies like PeopleSoft and others have tried an alternative pricing model before for their contracts and in every case ended up not working well due to the complexity of the new solutions. This one seems simple enough - but you never know."
This is a great model but a risky one. Vendors with this much skin in the game when it comes to charges for use, that allow the customer to walk away no strings attached (more or less); who at the same time are making this their only go-forward contract, are risking a lot.
In the Context of CultureThere is a context that explains how and why RightNow would make such a move. They, in the last year plus have undergone what seems to be a profound change in culture. They are showing in many ways including this latest one, a genuine company wide cultural commitment to the customer that I rarely see in more than spots at most of the companies in the CRM/enterprise software world. This isn't to affix blame to those who aren't - it is more to point out that RightNow is beginning to prove that they've changed their culture - rather than claiming it. I would venture to say that every vendor I speak with would claim to have a customer-centric culture but at the moment RightNow is the only one that's proving its beyond line items.
For example, along with the CSA they have customer success managers who don't have KPIs associated with financial benefit to RightNow. They are measured by their strategic success in helping customers businesses - not just projects with RightNow software. I know of no companies (prove me wrong someone) that have comparable positions.
But I'm not here to dwell on the customer success managers. This is about the Customer Service Agreement announced officially yesterday.
The Rest of the Industry & The ChallengeI'm not going to go into the merits and demerits of the contract as much - I don't think there's a lot of hidden pitfalls in this - its nearly black and white when it comes to how RightNow and its customers are going to contractually engage.
Is this a strategic coup for RightNow? Yes, because it is a unique contract that shows RightNow's commitment to the customer is more than just self-aggrandizing. Is it going to move the entire industry to respond to it? I doubt that though I suspect we'll see more aggressive efforts by customers to "acquire" some of the provisions with whoever they deal with and some vendors will mimic sections they find appropriate.
Ray Wang, a managing principal, COO at Altimeter Group, did a great job explaining how this kind of contract works to the benefit of the customer and RightNow. What might have gotten lost that he said in all the buzz around this effort was - companies are still going to be looking for functionality - first and foremost. Then, after that, all things being equal, the differentiator is the relationship you have with the vendor, which of course, is reflected in the kind of contract you have with them. My chant for that has been one since the millennium started - "when you buy the application, you buy the vendor." But the reason you're buying the vendor is because the application suits what you need.
RightNow is still going to have to compete on that stage. But to their credit, Their CX platform is pretty damned rich so they'll more likely than not be a short list selection for many companies - and this is where CSA will differentiate them.
The Only Bad Thing....While I appreciate what they're attempting to do by challenging the industry to meet their new set of standards (they want their CSA effectively to be a cloud customer bill of rights), they went about it in the wrong way, frankly, by their not-very-funny (actually incredibly lame) videos that attacked the maintenance "chains" that Oracle, SAP and salesforce.com had shackled around their customers. Aside from the ads being downers given the atmosphere - once again, a vendor had to "compete" by attack - rather than by the merits of the offering. "We're better then them, nyah, nyah" isn't a particularly useful approach and one attendee characterized the first videos as "far too gloomy for what they (RightNow) were trying to do."
So, drop the ads, RightNow. They are just silly.
But CSA is not only not silly, but for the first time in a long time, a company has moved the needle in an area that needed it badly.
Bravo. Its a great start.