RightNow Aims to Balance Customer Experience With Cost Savings

Just back from the RightNow's global Summit (October 6-8) in Colorado Springs, I'd like to share a few highlights. But first, kudos to RightNow for picking The Broadmoor resort as the venue. A spectacular setting in Colorado Springs coupled with superb service made for a memorable experience.

Better Experience or Lower Cost? Yes

Speaking of experience, RightNow CEO Greg Gianforte made it clear in his opening keynote that Customer Experience Management (CEM) will continue as a cornerstone of the company's strategy, focused on large, consumer-centric firms in CPG, financial services, travel, retail and telecom.

The company also does a significant amount of business in the government sector, perhaps a good thing because it looks like our banks will be government owned any day now.

But he's not banking (sorry) on everyone "getting" how a differentiated experience can increase loyalty and drive long-term profitable growth. When I pressed Gianforte on what was really driving their customers' investments in RightNow technology, he admitted that cutting costs was more important for most of their customers.

In other words (and this analogy really fits the beef-centric state of Colorado), cost cutting is the "steak" but customer experience is the "sizzle."

Still, the mood seems to have improved from a few years ago where mindless cost cutting and outsourcing was all the rage. Now more companies are at least trying to maintain their current customer experience and retain customers, while lowering costs.

All this to explain that RightNow's ponderous tagline—"Deliver a Better Experience and Cut Your Operating Costs"—is an accurate reflection of what the company actually tries to deliver. Gianforte claims that RightNow has saved $5B across all of its clients, which is kind of important in the "current economic environment."

I didn't hear a lot of new news on the product front. RightNow continues to build out its multi-channel contact center solutions and improve its knowledgebase and e-service technology. All good stuff, and more in store for 2009. But what's more interesting to me is how Gianforte will keep growing towards his goal of a billion-dollar company.

The company's most recent annual guidance (July 30, 2008) was that "revenue is expected to be in the range of $141 to $143 million, with recurring revenue growth of approximately 25%." That means hitting $1B will take another decade or so of growth at 20% per year.

How can they do it? I think the key is leadership in products and people, focused on the right markets.

Product Leadership

RightNow is well known for its customer-centric culture, but let's get real. When you're selling to large enterprises or government institutions, you've got to have an industrial-strength product.

VP of Products David Vap leads RightNow's product strategy, product management, and product marketing. A 15-year veteran of the software industry, Vap came to RightNow in 2006 from Software AG.

In an interview with Vap, I was pleased to hear that RightNow has become more open to partnering on the development side. In my opinion, RightNow has suffered a bit from the NIH (Not Invented Here) syndrome. With the exception of the Salesnet acquisition, Gianforte has opted to build versus buy. That's probably wise for core functionality, but I'm seeing a lot of innovative technology in the CEM arena, and RightNow can't afford to reinvent every wheel.

Vap says he's very open to working with third-party technology. For example, RightNow's co-browse and guided avatar features are integrated third-party SaaS services that are treated as RightNow products. In text analytics, RightNow has some basic capabilities already; deeper functionality could require a serious look at other alternatives, Vap says. Speech analytics is not on his radar just yet.

On the subject of cloud computing, Vap is still sorting out exactly what that means. However, he certainly confirmed what I've been hearing from Gianforte: RightNow has no intention of build a generic development platform in the sky. Instead, they'll offer an application platform to enable customers to enhance their core services. In 2009, custom objects will be supported.

All in all, RightNow's product strategy seems very well aligned with the company's target market, and Vap strikes me as someone who will make sound build/partner/buy decisions to keep products on the leading edge.

Virtual CIO

Of course, in the SaaS world features and functions don't mean much if the service isn't reliable and responsive. Maybe you can tolerate a Gmail outage from time to time, but what if you've got a few thousand agents twiddling their thumbs while your service provider is down?

One of the knocks on "cloud computing" is, well, who are those guys running it, anyway? SaaS vendors have done a good job establishing their credibility over the past 10 years, but now some are pushing towards more general purpose cloud computing, including PaaS (Platform as a Service) and utility computing.

Laef Olson has been RightNow's CIO the past couple of years, and says he is a "virtual CIO" to RightNow clients. Previously the CIO for Orbitz and CTO for cars.com, Olson has the experience (and scars, I'm sure) of what it takes to manage a complex operation, meet challenging service levels, and track performance.

Personally, I think Olson is probably the best salesperson at RightNow to connect with the IT control freaks that run large enterprises. He says increasingly customers want full transparency to their service provider, and he aims to oblige with detailed "customer experience monitoring" tools. Think of it as a kind of "glasnost" policy for RightNow.

As RightNow pushes deeper into the large enterprise market, CIOs are going to ask a lot of pesky questions to understand exactly how the service is being delivered. Olson says this plays well for RightNow, because they have a good story in providing multi-version support, SAS70 compliance, reporting and integration. Other vendors, by contrast, keep all customers on the same version and force their customers to upgrade at the same time with a "Frankenstein switch," he says.

As for the future, Olson says it's possible that RightNow could use "utility computing" as part of its technology stack. But for now, it's not clear that this would provide much of a cost savings (RightNow buys a lot of Dell servers already) to offset the potential loss of control and reliability.

Riding out the Storms

RightNow is nicely positioned to ride out the current financial storms. Analysts I talked with at the Summit, including Forrester's lead CRM analyst Bill Band, generally agreed with Gianforte's assertion that a down economy could accelerate a shift to SaaS vendors. Capital budgets tend to get cut first. We're already seeing signs of this in SAP's recent earnings warning. I'm betting Oracle will follow before long.

That said, I'm sure there will be plenty of pain to go around, and SaaS vendors like RightNow are not immune. Despite the gloom in the financial markets, Gianforte is upbeat about continuing to grow revenue and generate positive cash flows. And cash is Good Thing. Profitability is expected to return in Q4 this year.

It's pretty remarkable what Gianforte has engineered over the past decade. Starting with a simple FAQ on the web solution aimed at small businesses in 1997, RightNow has evolved rapidly into a high-end solution for large consumer-focused enterprises. Time will tell whether that's enough to reach $1B in annual sales, but I think Gianforte and his team can push the current strategy a few more years at least.

Further Reading:

Fasten Your Seat Belts. Cloud Computing Will Change the Way You Do Business

RightNow Gives a "Big Sky" Experience to Consumer-Focused Enterprises

Bob Thompson is CEO of CustomerThink Corp., an independent research and publishing firm focused on customer-centric business management, and founder of CustomerThink.com. Thompson is a popular keynote speaker, blogger and author of numerous reports, articles and papers, including Five Warning Signs for Danger Ahead on Your Customer-Centric Journey. Follow Bob on Twitter.