RightNow Buys CRM Rival Salesnet for $9M

 
 
By John Pallatto  |  Posted 2006-05-22
 
 
 
RightNow Technologies has decided to follow a buy rather than build strategy to expand its product line with the $9 million acquisition May 22 of on-demand sales automation competitor Salesnet of Boston.

"This acquisition means that well be quicker to market with more sophisticated sales products that will interact with out service and marketing products," said Greg Gianforte, CEO of RightNow Technologies of Bozeman, Mont.

He estimated that the Salesnet buyout would speed up the company product Customer Relational Management product development roadmap by more than a year.

"From a finance perspective, it is a classic build versus buy decision. We could have gone out and hired dozens of engineers to advance the product road map," said RightNow CFA Susan Carstensen.

But the additional expense would immediately cut into cash flow without delivering any increase in revenue for many months, she said.

The Salesnet acquisition will add about $1.5 million to $2 million in revenue this year compared with the assumption of about $3 million in employee compensation expenses to pay 26 Salesnet employees and about 12 offshore software developer contractors, Carstensen said.

Click here to read about RightNow CEO Greg Gianfortes view that open-source IT systems are right for an on-demand software service.

Salesnet also brings with it "several hundred customers, including enterprise customers with deployments ranging up to 2,500 seats and an existing partner ecosystem," Gianforte said.

The acquisition was generally "a positive move" for RightNow because it gives the company "a more expansive and robust suite of solutions that it can offer a potential customer," said Denis Pombriant, principal analyst with of Beagle Research Group, a CRM market research firm in Stoughton, Mass.

The combination also may help RightNow find new synergies between its existing service and marketing applications and Salesnets sales automation products, he said.

For Salesnet, the buyout was good news because it would have likely found it increasingly difficult to survive as a producer of sales automation software in a market that is increasingly dominated by companies that are selling full suites of on-demand sales, marketing and customer service applications, Pombriant said.

Salesnet made a "strategic mistake when it decided to focus" only on the selling process, he said.

"The real opportunity in on demand was in producing a suite of solutions that covered all parts of the front office, not just selling," said Pombriant.

In fact, Gianforte said that RightNow is counting on the Salesnet customer base to provide "an immediate opportunity for up sell and cross sell, and well be launching several initiatives for Salesnet customers to adopt more of our full solutions."

"Strategically, this acquisition is not a new direction" for RightNow, Gianforte said. Instead, it is a "rapid acceleration of our existing roadmap. Some of the Salesnet features will initially be integrated this summer, with complete integration in 2007," he said.

Salesnets headquarters will become RightNows Boston office and remain a center for development, sales, marketing and product support, company officials said.

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