RightNow has introduced a new SaaS licensing model for its cloud-based customer support services that is designed to be more flexible and easier to understand for customers, and has challenged other providers to take the same approach.
The company unveiled a new customer Cloud Service Agreement (CSA) on Thursday. The agreement aims to avoid landing enterprise customers with unused 'shelfware' via usage provisions that allow them to change the number of users month by month and to ensure satisfaction by offering yearly contracts that allow them to terminate more easily.
RightNow is a smaller player in cloud-based software services than its rivals, such as Salesforce.com and Oracle. Company chief executive officer Greg Gianforte said the CSA is a call to action to the entire industry, which he said have failed to deliver on the promise of the cloud they have been touting.
"The promise of SaaS was that we could significantly lower the total cost of ownership, have faster deployments, rapid innovation, and reduce shelfware and long-term locking. The software industry has only delivered half of the problem — we solved the technical issues but we've [dragged] along some of the worst aspects of enterprise software delivery," he said.
While Salesforce.com and Oracle CRM On Demand offer monthly pricing, customers usually pay annually in advance, and they may also pay extra if they use more storage than the licence fee covers. Although customers can increase the number of Salesforce seats licensed at any stage, they can only reduce the number of seats when the contact expires. One-year contracts are not unusual — SAP On-Demand contracts can be as short as three or six months — but prices aren't always fixed: the Salesforce.com contract states that fees may be increased with 30 days' notice.
Under the new RightNow CSA, customers sign a one-year contract, but the price for the cloud-based CRM is fixed for three years, even if they reduce the number of seats they take. If the contract is renewed, they get a further three-year price cap, meaning the price could be fixed for as long as six years.
In addition, the annual contract allows customers to change the number of licences they use from month to month by offering a pool of 'seat months' rather than having to buy enough seats to cover peak usage. Gianforte compared the flexible approach to the pool of minutes provided on a mobile phone plan.
"They roll over month to month within a given year, so you can scale to deal with seasonality," he said.
It also provides for free 90-day trial usage with unlimited capacity, which allows a business to test the services in full to see if they deliver what the service promises before committing to the purchase. Salesforce.com offers a 30-day trial, but only for its Professional Edition, not the Enterprise or Unlimited Edition services; Oracle's Beehive On Demand collaboration service has a 30-day free trial, but only for five seats.
A CSA contract also includes a percentage refund if the service level agreement (SLA) is not met, to guarantee that providers that have locked their customers into long-term contracts will still perform, according to RightNow.
"Vendors ought to put guarantees with their technology," said Gianforte. "So we will pay our customer. If we don't deliver, customers should expect to get a cheque from us."
Ray Wong of analyst Altimeter, which published its own 'SaaS Bill of Rights', said that RightNow's new CSA is significant.
"I think at first the software buyer is going to say 'don't I have that already?'— and they're going to go and look and realise that 'I don't have these clauses; I can't flex down when I need to, I'm stuck on an annual agreement.' You can buy month to month but you end up signing an annual contract."
He believes the predictable costs are as important as the flexibility to many customers. "One of the biggest fears people have had is 'What happens if they jack up my rates?'"
Wong also said that typically, the rates for many cloud services are not transparent. "People are getting 'nickel and dimed'... there are some unintended costs that show up on storage," he said.
The changes aren't purely in the customer's interest. Wong believes there are advantages for SaaS vendors in more flexible contracts.
"I think vendors who are progressive would want to sign up [to this challenge] because it takes away friction for the sales cycle and it engenders trust. If you want to change the dynamic, a vendor would take the challenge and come up with something more customer friendly."
Based on the interest he has seen in his SaaS Bill of Rights, Wong also predicted that the terms RightNow is introducing could become common. "If this takes off, other vendors will have to play catch-up," he said.