RightNow's bullish annual user conference was marred by Wall Street gloom, despite new customer wins and awards. How did CEO Greg Gianforte address the economic challenges facing his firm and does he subscribe to the theory that software as a service players are immune to a recession?
By Chris Middleton
Software as a service (SaaS) CRM provider RightNow held its first international summit in Colorado Springs this week, in the shadow of the grizzly bear-prowled mountains – and an increasingly grizzly bear market on Wall Street.
When the sun shone it was as hot as summer, but whenever a cloud passed in front of it the temperature dropped by twenty degrees. And so it was on Wall Street too, with the DOW dropping 800 points one day, and 500 points the next as yet more financial clouds appeared.
"I wouldn't say we're recession proof; I would say we're recession resilient."Greg Gianforte, RightNow
Some 800 delegates mingled with 100 RightNow staff at the Broadmoor resort, where golf, a customer hoedown, a luxury spa and even a first-night Oktoberfest entertained delegates (Germany is big business for the Montana-based company). Recession, what recession?
Among those customers were delegations from Electronic Arts (EA), Activision, BA – and BT, which continues its foray into cloud computing with a 3,000-seat relationship with RightNow. The plan with BT is, in CEO Greg Gianforte's words, to “land and expand” and tempt the telco away from its 14,000-seat Siebel installation. “To my mind it's only a matter of time,” said Gianforte. Bold words.
On the conference stage, Gianforte pointed to RightNow customers' CRM successes, saying that more than $5 billion has been saved in customer operations across its client base.
63% of RightNow's clients are large enterprises and government agencies, setting it apart from the SME focus of most SaaS companies. RightNow has signed up 250 new clients in the past year, said Gianforte, including eBay (a relationship kicked off in Germany), Emirates (not implemented yet), Fox Interactive Media, IBM Bluebox, Harrods, Napster, Netgear, SuccessFactors and Expedia.
The travel sector as a whole is a RightNow strength, along with financial services, retail and telecoms. And Gianforte confirmed that the company is pursuing a vertical strategy: “Hi-tech, telco, retail and consumer packaged goods [CPG]. We haven't seen a slowdown yet in retail CPG, but it's hard to see that won't happen.”
Wall Street carnage
Indeed, it was not all good news: on Monday Gianforte issued a statement saying that RightNow’s Q3 payment terms were being hit by the carnage on Wall Street.
The news coincided with SAP's profits warning: something Gianforte was keen to play down any directional association with, as RightNow's revenues remain in line with expectations and it has $100 million cash in the bank. Negative cashflow from operations in the quarter is “primarily due to a lengthening of payment terms and slower cash collections”.
Greg Gianforte, RightNow
Accordingly, RightNow expects to reduce its full-year guidance for cash from operations. “We are seeing more contracts with periodic or annual payment terms and slower cash collections, which we believe are both being driven by recent economic conditions,” concluded the statement.
“In other words, customers are holding onto cash for longer and paying us slower,” said Gianforte to MyCustomer.com later: no surprise there, given the fear gripping the stockmarkets. In the recent past, some customers have paid for two-year deals up front; now, all that is changing.
“I wouldn't say we're recession proof; I would say we're recession resilient,” he continued. Challenged as to whether RightNow or any of its partners have been impacted by recent banking collapses he said, “I don't know... we'll know when they don't pay their bills. Can I say that none of our customers will go bankrupt? No.” (In fact, we did note that RightNow technology partner Cast Iron, which had a stand at the event, was partly backed by Lehman Brothers. The effect of the bank's collapse on the company is unknown.)
There are other repercussions of the Wall Street rout. RightNow VP EMEA Joe Brown said that the approval level for even small contracts is rising through customer organisations: even £60k deals now fall on the boardroom table, and are no longer the domain of middle-ranking managers.
That said, chief marketing officer Jason Mittelstaedt countered that RightNow's speed of implementation makes it an attractive proposition in such a challenging market. “It's a three-month project. Who'd sign off an a 15-month project now?” he said, comparing RightNow with on-premise enterprise implementations. Gianforte even hinted that the downturn might be good for SaaS companies – perhaps opening up new opportunities to sell into the financial services space.
Bullish mood
Back on the conference stage, and in bullish mood despite the news from New York, Gianforte outlined the reasons for RightNow's robust market proposition, as he sees it: “Cost containment; increased focus on customer experience – analysts are now calling out consumer-centric CRM as a distinct category from B2B CRM – and call centre transformation.” Of SaaS itself, he said: “This is not a trend; this is the future of software.”
Gianforte revealed headline findings from the company's annual Harris customer survey. “87% of the people we spoke to had stopped doing business with a company because of a poor customer experience. In 2006 it was 68%, and last year 80%,” he said. “Consumer expectations continue to rise; just doing the same thing is not getting it done.”
RightNow's own customer metrics are solid – but not perfect, with an 80+% conversion rate from pilot implementation to live contract. Why not 100%? “Sometimes budgets are cut,” he said.
VP of products David Vap set out the emerging CRM demands that RightNow has satisfied in 2008: multichannel choice; the mantra 'service is the new sales'; augmentation of the contact centre with niche services; contextual workspaces, and above all, consumer-centric CRM. This latter trend is being reflected in new job titles in senior management at many customer companies, said Vap.
The next quarterly release of RightNow (in November) will focus on transforming the contact centre, with agent scripting, a desktop extension bar, customisable logins, and ongoing improvements to marketing/feedback and analytics, he said.
Looking ahead to 2009, planned new features include: a desktop workflow ability to step agents through business processes and automate tasks; answer versioning (putting all possible versions of an answer at the agent's fingertips), and the ability for customers to interact with a human-like avatar (virtual person or character) to personalise their searches.
Gianforte raised the prospect of adding the ability for customers to take mobile pictures and then send them to a contact centre agent to help solve problems with faulty products, for example. He also cited a custom application written for iRobot (makers of the Roomba robot vacuum cleaners), which allows customers who do not the know the model number to, in Gianforte's words, “put the robot on the phone” (which transmits the serial number to the contact centre).
But away from an immediate future of robots and avatars, Gianforte was keen to stress RightNow's present, especially its 150 US federal government contracts, including the US Department of Defense (DoD). Most of these want to move off premise and onto a hosted service, he explained.
Asked about the security of hosted services (in light of data security breaches in the UK and elsewhere), Gianforte said that government departments invariably say “Wow, that's a lot better than what we do.” Pressed as to whether that included the DoD, Gianforte was less forthcoming...
See next week's MyCustomer.com for more interviews and case studies from the RightNow conference.
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