RightNow Challenges SaaS Vendors On Pricing - InformationWeek

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3/5/2010
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RightNow Challenges SaaS Vendors On Pricing

Software-as-a-service vendor RightNow challenges other on-demand suppliers to get on the cloud pricing model.

In a provocative, if not holier-than-thou stance, RightNow, a supplier of Web customer experience management software, has issued what it calls its "Cloud Challenge" to Salesforce.com, Oracle, SAP, and others.

The cloud offers new economies of scale and a fairer pricing mechanism than the packaged software model that went before it. With the cloud, vendors only need charge customers for what they use, unlike those wolves of the packaged software industry, RightNow CEO Greg Gianforte seemed to be saying in an event staged in San Francisco March 4.

"We are challenging the industry to finally deliver on the full promise of the cloud. I challenge our peers to step up and engage with clients like true cloud vendors, not on-premise vendors in cloud clothing," said Gianforte at the Fairmount Hotel Thursday morning.

RightNow's chief marketing officer, Jason Mittelstaedt, was quick to pick up the beat. "This applies to all cloud vendors, but to software-as-a-service vendors the most," he noted. There were many ways for the packaged industry to charge customers for software, even when they ended up not using it.

Mainly the upfront license combined with annual maintenance fees sometimes bears little connection to actual use. Likewise, online software-as-a-service vendors sometimes seem all too eager to do likewise, Mittelstaedt said in an interview.

Software-as-a-service customers are being saddled with "shelfware," just like packaged software buyers, he claimed. By that, he means they have to pay upfront for more software than they may actually use.

Some on-demand contracts require the customer to pay for the maximum number of users he expects to engage at some future time, not the number who are actually using the application. They are also enticed to sign long term contracts that lock them into such rates for three or five year periods, at favorable rates that are still higher than actual usage would require them to pay, Mittlestaedt charged in an interview.

The Cloud Challenge urges:

  1. No shelfware; pay for what you use with long term price certainty.
  2. Transparent pricing; customers should get five-year fixed pricing.
  3. No lock-in; customers should have the right to walk away from the contract if service levels or application functions don't meet expectations.
  4. Flex up or down; customers should be able to adjust the number of seats they are paying for, capacity of servers rented, or nature of application modules they're renting with prolonged negotiation with the vendor over the contract. Again, with charges based on actual usage.
  5. Cash for failed service requirements; on-demand vendors offer apologies when service disappears, but seldom cash. If a contracted service goes down or SLA isn't meant, there should monetary reimbursement to the customer, not just words acknowledging the outage.

"I challenge clients to stand up, demand their rights and break free from the shackles of traditional enterprise software engagements," stated Gianforte at the event.

Ken Harris, CIO of Shaklee, is a RightNow customer. He said in an interview that RightNow is taking to the soapbox because it can live up to its own challenge. "I'm not demeaning any of the other SaaS vendors, but the RightNow gang just gets it that on-demand is a totally different model than on-premises," he said.

Harris was particularly adamant that financial reimbursement should follow a software-as-a-service outage. "That's been a critical issue in every contract that we've negotiated," he said. He called reaching an agreement with the nine SaaS vendors Shaklee deals with other than RightNow "a drawn out education process" that was hard to conclude.

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