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| Home - Industry Article - Jan 06 Issue |
2006 Will Be a Horrible Year for Software Vendors |
By Greg Gianforte, CEO, President, Chairman and Founder, RightNow Technologies
With Siebel being purchased by Oracle, there is a huge vacuum in the CRM marketplace. In addition, on demand is allowing more organizations, especially in the middle market, to afford enterprise-class CRM functionality without the 6-figure cost. This is opening up even more opportunities. In fact, we are seeing a changing of the guard in enterprise software.
2005 was a tremendous year for RightNow. We continued our unbroken string of 31 consecutive quarters of revenue growth, rolled out several significant new releases, and established ourselves as the most complete on demand CRM solutions provider for the middle market and Global 2000. It was a particularly important year for the on demand/Software as a Service (SaaS) market overall. Corporate buyers are embracing this model in order to accelerate time-to-benefit, minimize the technology ownership costs that have historically dragged down ROI, and bring accountability into their relationships with software vendors.
Ups and Downs in 2005
The CRM marketplace as a whole has a very poor track record of customer satisfaction. Oracle, Siebel and SAP ("old guard") have never been characterized as having very good satisfaction rates. The SaaS model has significantly increased customer satisfaction, and also brought back accountability. SaaS deployments are much shorter and less costly than those of the "old guard." In addition, if a SaaS vendor doesn't satisfy their customers there is a very low switching cost. We've been fortunate to have a 90% plus customer retention rate, and have instrumented our business to be accountable to our customers" success.
It's also great to see the market as a whole come to us in its embrace of the hosted SaaS model. Microsoft, Oracle, and SAP are trying to jump on the bandwagon now - which is fine for us since they're validating our model even though they won't be able to deliver it as effectively as we have. They also have major inhibitors to truly embracing this model. First, they have to build for multi-tenancy (only Siebel on demand has done this). Secondly, they have to alienate their partner network that feeds on the complexity of their solutions. With SaaS, implementation is short and quick, and it removed complexity. Third, revenue recognition is mainly on a pay-as-you-go vs. all the money upfront. It will be hard to satisfy Wall Street in changing this model. Finally, as I mentioned above, none of the old guard have a culture of customer success. This will be the hardest one to change.
Biggest Lesson
The biggest lesson was to continue putting customers first. In a globalized economy, it is tough to compete on price. And with technology proliferating so quickly around the globe, it's also tough to compete on technological innovation alone. So a great customer experience has become a critical competitive differentiator.
This is not only something we help our customers, it's also something we possess ourselves. That's why we have such strong, referenceable customers in such a broad range of industries, which has turned out to be a big benefit when it comes to ringing up sales. Nothing turns a credit union or a video game company on more than see the results you've delivered for other credit unions or video game companies. So we are going to continue making sure that every customer achieves maximum quantifiable business benefits from our software and services. We're solidifying our position as the one CRM vendor whose own great customer relationships are a primary proof-point - instead of falling into the category of CRM vendors who claim to be able to help you develop great customer relationships, even though they don't actually do it themselves.
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