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| Home - Industry Article - Jan 06 Issue |
2006 Will Be a Horrible Year for Software Vendors
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Strategies That Did Not Work
We had customers achieve incredible ROI by reducing contact center call volume, improving the efficiency of their marketing operations, and boost sales to their installed bases. But we were very surprised to discover that these stories did not sell well when it came to PR. We really thought our proven top- and bottom-line business impact would make bigger news than it did. So, even though it remains a priority for us to achieve and document that impact, we have learned that we shouldn't set our expectations too high about great results alone driving our "buzz" factor.
We had great success in turning around our media visibility by focusing on issues such as SaaS, the way we monetize open source, and the struggles the software industry's Old Guard are facing as their proprietary, take-the-money-and-run business models lose favor. People are really taking notice of the fact that we're playing a lead role in changing the rules when it comes to implementation and customization of enterprise applications. Of course, the reason we're changing the rules is to benefit our customers. But a lot of our challenges have to do with educating opinion-makers. And we've really turned that around in the past couple of quarters.
One of the most exciting moments of the year was when one large client ripped out a 1,600-seat Siebel contact center implementation in favor of a RightNow CRM solution. Right after we went live, the customer said, "RightNow did more in 45 days than Siebel had done in two-and-a-half years." That was very satisfying. But there have been several such moments, since in Q3 alone 67% of our revenue came from corporations with greater than $1 billion in revenue and large government organizations. The size of the deals we're doing is definitely going up now that our approach to the on demand model has clearly proven itself in the real world.
I might have been bolder in my predictions about Oracle's inability to digest Siebel On Demand and Microsoft's inability to compete in the SaaS space. Everything I said is turning out to be correct; I just could have said it louder and earlier.
Expectations for 2006
The hosted SaaS model will continue to grow, while the conventional high-TCO model will become increasingly unappetizing to corporate IT buyers who now have a great alternative. Open source will also continue its ascent as buyers realize there is no reason to pay outrageous licensing fees for proprietary operating systems, databases and web servers when the open source alternatives are just as good or better. Companies will also spend on technologies that enable them to create a superlative customer experience across all channels, since competitive success in a "flat earth" economy will depend more and more on differentiated service - rather than price and/or features.
2006 will be a horrible year for software vendors who don't understand the technical and business implications of SaaS, as well as for those that remain slaves of Oracle and Microsoft. On the other hand, we believe 2006 will be another banner year for RightNow. We've grown 50% or more the last few years, and we are expecting growth between 40% and 50% for 2006. The challenge will be to continue to gain market share.
There are several technologies that are poised for breakthroughs. Speech recognition is particularly interesting to me, because it has a lot of practical business applications. The issue as usual isn't just the technology itself. It's whether the vendor can package and deliver the technology in a way that solves the customer's business problem and is relatively painless to assimilate into an IT environment that's already quite complex and tough to manage.
Greg Gianforte is the CEO, President, Chairman and Founder of RightNow Technologies. He has led RightNow from its founding in 1997 to 31 consecutive quarters of revenue growth, 14 consecutive quarters of cash-flow positive performance and a successful IPO. Greg founded Brightwork, a pioneering developer of network management applications, in 1986. He is also the author of "Bootstrapping Your Business: Start And Grow a Successful Company With Almost No Money". He holds a BE in electrical engineering and an MS in computer science from Stevens Institute of Technology. For article feedback, contact Greg at ggianforte@rightnow.com
 
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