RightNow shifts the needle on enterprise value

RightNow has plugged a gaping hole in the myth that SaaS is necessarily better that on-premise. In an announcement that is bound to have industry wide repercussions, it has announced what it terms The Cloud Services Agreement.

RightNow has plugged a gaping hole in the myth that SaaS is necessarily better that on-premise. In an announcement that is bound to have industry wide repercussions, it has announced what it terms The Cloud Services Agreement. Key features of the new model:

  • 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

Any one of these elements would be cause for celebration among buyers looking for relief from long term contracts but to see such a complete package represents a shot across the bows of both on-premise and SaaS vendors. Fellow Enterprise Advocate Vinnie Mirchandani described it as a step in the right direction.

Ray Wang (another EA) used the occasion to fill out the story by referencing the interest there has been in the SaaS Customer Bill of Rights. When asked whether the anecdotal story of 30% Salesforce.com customers being stuck with shelfware is true, he knowingly pulled a 'ziplocked' face. Go figure.

Frank Scavo, another EA sees this as sending a clear message to the industry:

"There's a lot to like in this announcement," said Frank Scavo , managing partner of the IT consulting firm Strativa, in an e-mail. "For example, the cash level credits. With many providers, SLAs are weakly written or only offer token concessions. RightNow's terms and conditions look like they put real teeth into RightNow's SLAs."

For my own part, I applaud any vendor that recognizes and acts upon the shifting tide in enterprise software, challenges accepted norms and exposes the reality of negotiated deals rather than persists in selling a high level message. As always the devil will be in the negotiated detail. However, it is good to see the company offering CSA as an automatic conversion once existing contracts come up for renewal. As I am writing this, other vendors are messaging me saying they need take notice. They need to do more than that - they need to act.

The large vendors will look at this, see that RightNow is a relatively small company, dismiss this as a sideshow and carry on as though nothing has happened. At least in public. In the background, they will be scrambling to assemble a story that speaks to the long term value they deliver as a justification for long term commitments. As time goes on and as large ERP becomes better recognized as a commodity play, then those long term contracts will wither - or be negotiated back to more reasonable figures than the current industry standard of 22%.

My only real concern lays with Wall Street. They already see SaaS as an 'uncertain' business model that doesn't give them the visibility they need to assemble their buy/sell models. RightNow's announcement has the potential to throw some uncertainty into its revenue mix, making model construction that much more complicated. The truth is that financial analysts are going to have to get used to this new reality. As Jim Holincheck, Gartner analyst said to me in a direct message on Twitter: "Phone companies manage it, I do not see why SaaS vendors can't, but it will be a change in visibility." Neither do I.

But then in recent days, it seems the market wants to punish RightNow for 'doing the right thing.'

That's unfortunate but my sense is it will blow over once the market sees that doing business with RightNow just got a whole lot easier and so hold the potential for plenty of upside.

More important than any of this though is the fact that in taking a position, the spotlight now turns on those vendors that are gouging their customers with little apparent benefit. It will be a theme to which people like myself and the other EA's will return to the increasing annoyance of incumbents.

[Still image taken from video shown at the end of the RightNow webinar. Checklist from Vinnie's post]