I’m at the top of London’s totemic Gherkin landmark tower listening to SaaS CRM vendor RightNow’s announcement of what it calls the ‘Cloud Services Agreement’. CEO Greg Gianforte is challenging SaaS and software vendors to emulate a proposition that, to me, always should have been on the table from every reputable SaaS vendor. Essentially, RightNow is promising not to take advantage of a buyer-vendor relationship where the provider, to be frank, has the customer’s most sensitive parts in a vise. For all the rhetoric that SaaS customers are free to walk away at any moment because of its supposedly pay-as-you-go business model, the truth is that, once an enterprise commits to a SaaS application, it’s very difficult to back out of that relationship. People worry about their data being hosted elsewhere, but what’s far more critical is that the vendor owns the customer’s business processes, and it’s highly disruptive to move to another provider once an organization has made a commitment to a specific platform.
RightNow’s Cloud Services Agreement makes several key commitments, such as forward price visibility, being able to adjust numbers of seats in line with usage, the right to walk if the vendor doesn’t meet commitments and — most strikingly — cash refunds for breaches of the SLA. I suspect a lot of people’s first reaction is going to be, surely I get that already from a SaaS vendor? Amazingly, this kind of proposition is a novelty in the SaaS industry. I should add, though, that this is in large part the fault of customers, who are so used to buying conventional licensed software with no guarantees, huge shelfware components and long-term contract terms that they blindly walk into the same arrangements with SaaS vendors without even realizing there might be a better way.
Enterprise buyers like to budget over one-year or three-year periods and in some senses it’s more convenient to tie yourself into paying for too many seats because that’s the way you’ve always done things. But SaaS vendors have been taking advantage of that, to the benefit of their bottom lines — RightNow’s CEO Greg Gianforte quoted anecdotal estimates that as many as 30% of Salesforce.com seats are shelfware. Today’s economic climate, however, forces buyers to scrutinize costs and value for money much more carefully and for that reason, the timing of RightNow’s move is well chosen and it’s quite likely I think that other vendors will now look at the contract offers they’re making to customers and how they can make them more attractive.
I hope at the same time they will also look at some of the other points I’ve put forward in what I call my five-point code of practice for SaaS vendors. Perhaps I’ll have to add a sixth point to bring in some elements of RightNow’s new proposition, especially making a commitment that customers won’t overpay for seats and usage (’no shelfware’), which is the standout element I think of this new announcement.
