RightNow's Customer Service Agreement (CSA) - A Step in the right direction
RightNow's announcement in March about their new licensing structure is being lauded as a game changer, but I would like to term it as a step in the right direction. This is a step in the right direction towards the promised land of 'Reaping SaaS benefits'. By offering a Three Year Price Commitment plus Three Year Renewal Price Cap coupled with Annual Termination option, cash credit for SLA breaches and real 'pay-as-you-go' contracts, RightNow has openly challenged the providers of SaaS who engage with customers with multi-year 'lock-in' contracts. The SaaS market as it stands, thrives on some of the key positives of the on demand concept. Quicker time to market, lesser maintenance headache (compared to on-premise software) is enough for most companies to go for a SaaS offering. Given that, the SaaS providers need to differentiate themselves and they do so and compete based on the functionality that they offer. But once the capability of the software S of SaaS starts to even out, the service S of SaaS will be the differentiator.
As Paul Greenberg wrote in his blog: "... companies are still going to be looking for functionality - first and foremost. Then, after that, all things being equal, the differentiator is the relationship you have with the vendor, which of course, is reflected in the kind of contract you have with them."
So, this kind of a customer commitment is definitely welcome and a step in the right direction. Now the customers can expect the other SaaS providers to follow suit. For RightNow, one can only wait and see if this kind of a strategy is going to backfire with customers having the convenience of moving out. At the same time, there could be more customers signing up to enjoy the advantages of such a contract. One can also expect different pricing models and contracts being unveiled which put customer in the center.
At the peak (or depths) of the downturn NetSuite offered flexible or shorter contracts (hence lesser payment) to its customers who until then were paying for multi year contracts. So one can say, the practice of locking in customers was already being reconsidered until RightNow made it more formal. There could be naysayers to this kind of a contract, arguing that longer term contracts generally have a walk out clause. They also say that there are benefits associated with long term contracts, as the buyer doesn't have to repeat the same decision making process every year, the longer term helps build a relationship with the vendor and buyers have budget certainty. While it might be worthy to analyze these factors as well, in the long run, when changes will need to happen at a much faster rate, shorter contracts and robust SLAs might be the way to go.
