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 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 Culture
There 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…