SAN FRANCISCO-RightNow Technologies, competing as one of the smaller players in the software-as-a-service market with the likes of Salesforce.com, Oracle, Microsoft and SAP, offered a “Cloud Services Agreement” that it claims is a radically better deal for customers than the contracts offered by the big guys.
The new agreement, which the SAAS customer service and support software company has implemented through it sales staff since Jan. 1, 2010, and announced publicly here on March 4, “provides the guaranteed-pricing benefits of a traditional Master Services Agreement without the pain,” company officials said.
The pain points common in other service contracts for SAAS as well as on-premises software include hidden charges, escalating maintenance fees and the SAAS equivalent of “shelfware,” large numbers of unused seats that the customer has to keep paying for, said RightNow CEO Greg Gianforte.
The key points of the services agreement include “annual usage agreements up or down,” which allow customers to adjust the number of seats or subscriptions the company pays for based on their business needs. Most typical software purchase contracts require customers to buy more seats than they need to lock in long pricing for the life of the deal.
To this end, the company is offering what it calls “annual pools of capacity,” which will allow customers to adjust the number of seats it uses over a 12-month period to accommodate “seasonality and fluctuations in their businesses without having to pay extra for spikes.” Most SAAS service contracts lock customers into buying enough seats to accommodate peak potential usage during the course of the year.
RightNow is also offering a “three-year price commitment with a three-year renewal price cap,” which Gianforte said provides more price predictability for customers than other software companies, which usually reserve the right to raise fees over the life of the contract. Gianforte contends the agreement fixes pricing for six years-the initial three-year price point, plus a predictable cap on the renewal price for the next three years.
Furthermore, RightNow contends that customers are only required to commit to a service contract for one year because it’s offering “annual termination for convenience” that allows customers to walk away from the agreement “if right now isn’t executing client satisfaction. In contrast, with typical software purchase contracts, customers are locked into buying so many seats or copies of an application and don’t have the option to terminate the agreement early, at least not without paying heavy penalties.”
But if RightNow’s SAAS software fails to achieve service-level agreements for uptime and reliability, the company is offering “cash service level credits” under which it will refund a portion of the client’s subscription fee. RightNow is promising uptime of 99.95 percent. Most service agreements in the SAAS sector only offer at best credits toward future purchases if the vendor fails to meet service-level agreements, Gianforte said.
Gianforte claims that the Cloud Service Agreement takes most of the risk out of signing up for a SAAS service contract and greatly reduces the amount of negotiating and haggling that’s usually required to close the deal.
In fact, Gianforte and his Chief Operations Officer Susan Carstensen said that the CSA has already speeded up the sales cycle since the beginning of the year. RightNow will offer the CSA to current customers as their contracts come up for renewal, Carstensen said.
The terms in RightNow’s CSA conforms in substance to the precepts laid down in the report “Customer Bill of Rights” for SAAS, published by Altimeter Group partners Ray Wang and Jeremiah Owyang. This report offers “39 Best Practices to Improve the SAAS Client-Vender relationship.”
Wang, who was a speaker at RightNow’s CSA introduction at the Fairmont Hotel here, said that the CSA could serve as a model for the rest of the SAAS industry and that the customer of other SAAS software companies will likely start lobbying for similar terms. “Anyone who has an annual service agreement will think, ‘Don’t I already have these clauses in my contract?'” Wang said. But that’s unlikely to be the case, he said.
Ken Harris, CIO and senior vice president of Shaklee, a producer of nutritional supplements and vitamins based in Pleasanton, Calif., said he has negotiated contracts with 10 different SAAS vendors over the past five years and he “doesn’t know of any vendors who are doing anything close” to what RightNow is offering in its CSA.