RightNow tries to change SaaS contract, pricing game

CRM vendor RightNow announced a new SaaS (software as a service) pricing and licensing model on Thursday that it says provides customers with fairer, clearer deals. The company also issued a "Cloud Challenge" to competitors, urging them to adopt similar principles.

RightNow contends that while SaaS has changed the way companies use IT, providing benefits like faster implementations and quicker innovation, contractual engagements are wracked by the same problems as on-premises software, such as underutilized or excess user seats, hidden fees and restrictive contractual terms.

Under RightNow's Cloud Services Agreement (CSA), which is now standard for all new business conducted by the vendor, customers receive fixed pricing for three years. They also have the ability to renew for another three years at a cost determined at the time the initial contract is signed.

Users who sign multiyear agreements can cancel on an annual basis for any reason, said CEO Greg Gianforte .

Another key aspect of the CSA sees customers buy a pool of "seat months" that are consumed on an as-needed basis, Gianforte said.

Customers can adjust the number of seat months each year. This will help put an end to shelfware, and particularly benefit customers with seasonal spikes in business, such as an online retailer, Gianforte said.

RightNow is also pledging to give back part of customer's subscription fees if it fails to meet service-level agreements. The company is also offering 90-day pilot programs with unlimited capacity.

"It's time for a change. The best thing that could happen is that the industry responds and everyone adopts the Cloud Challenge," he said. "These are reasonable expectations and if you're not getting them, you're being taken advantage of."

The announcement is "absolutely the right step and right direction from the point of view of SaaS and SaaS vendors," said Ken Harris , CIO of natural nutrition products company Shaklee, a RightNow customer for more than five years.

Shaklee has a current contract with RightNow and therefore can't immediately take advantage of the CSA, but the new terms reflect a number of provisions the company negotiated for in past years, he said.

The CSA's use of "seat months" will be a big help, as Shaklee's business is somewhat seasonal and underutilized seats do present "a real problem," he said. "With any software that's seat-based, you have to build the church for Easter Sunday but the rest of the days it doesn't fill up, as the old saying goes."

RightNow is just one of nine SaaS applications Shaklee currently uses, Harris said. The CSA "is going to give us a lot of leverage. A number of things that are in here, we've been trying to negotiate in all of our deals, not always successfully."

Analysts also praised RightNow's announcement.

"RightNow does go some way to address likely user pain points around adopting cloud apps, particularly in relation to guaranteed pricing over a multi-year period," said 451 Group analyst China Martens via e-mail. "Having to pay over the odds for both compute power and storage for some versions of vendors' CRM software have given some customers some nasty surprises."

"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."

The announcement speaks to a new front in the software industry's pricing wars, he added.

"Vendors have been discounting for years to win specific deals. The price competition is now moving to long-term maintenance and support, where the real money is," Scavo said ."We've already started to see it with on-premise vendors such as Infor and Microsoft Dynamics, who seem to be emphasizing their maintenance and support programs these days as a way of differentiating themselves from SAP and Oracle. Now we're starting to see it in the cloud."

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