Enterprise Software Summit Day 1: Greg Gianforte, Rightnow

Rightnow – Greg Gianforte

I met Greg for the first time today and very much enjoyed the opportunity. I initially thought we might clash a little because he is pretty negative on SAP, but it just never came up. Greg makes some very good points about building a business around customer satisfaction and measuring your success with your technology as customer ROI. I get the feeling from Greg that he just doesn’t mouth the words, he measures his actual results this way.

Greg is talking about why hosted delivery is a cheaper way to deliver software. He makes an interesting comment about the cost of hosting an implementation is cheaper than the cost of customer support for an on-premise implementation, even without charging for the hosting. I’m a little confused about this because Rightnow does a lot of on-premise implementations but I think what he is talking about in “old on-premise” is the kind of stuff that SAP does.

Question from Seth Henry about th 5x faster implementation and how that’s possible. Greg uses the implementation at Intuit where he displaced Siebel, says it took 45 days to implement. Didn’t realy answer the question but it does appear that what he is suggesting is that he has greater control over how the app is implemented.

In this mornings conversation Greg made a really good point about how hosted multitenancy delivery is good for SMB but larger enterprise customers want choice on not only the delivery option but also how much custom fitting they are getting. Interestingly he says that financial and government customers require on-premise more so… don’t know why.

This is one area where I think SAP would agree with Greg, your architecture should support both kinds of deployments. The new SAP on demand CRM (which sadly doesn’t have a more creative name than that) relies on the same principle, I just think we are positioning our messages wrong.

90% of RightNow customers host it
10% implement it on site
As a separate decision they decide how to pay for it, temr paid monthly, net 30, or perpetual plus maintenance. (25% of their customers pay monthly)

BTW, their hosting costs are 6% of their topline. This is an interesting number because in nearly all of the startups I have been involved with that host their app the cost of hosting almost always exceeds the initial model by a fairly large amount. What Greg’s number would suggest is that there is a fairly significant economy of scale when you get above $x. Added later that 18 people manage 5,000 deployments in their hosting environment.

This morning Greg made a point about it not being enough to be multi-tenant, that you also had to be multiversion. Here’s where he is providing some details on that, they have an automated upgrade system where customers schedule upgrades into sandbox -> production process that their customers are part of. The automated system is the key to making it scale.

Okay, upon some reflection and discussion it would appear that the multi-tenant/multi-version is really a big partitioning scheme as opposed to a shared data model.

Ross asked why forced upgrades don’t work. Greg answers that the training requirements that should be part of organized upgrades are significant in systems like call centers where order taking is taking place. Although in the explanation Greg does implicitly acknowledge that he is forcing upgrades because customers only get fixes or engineering work on the latest versions. Their contracts also have standard terms about 2 versions back being current.

Integration. “Web services remove location constraints”. Couldn’t agree more. In going into somo of the detail here it would appear that Rightnow is channeling customization requests into configuration requests (signficant difference). They do, according to Greg, have an architecture that supports customization in a multi-tenant environment, which I would assume is the multi-version capability referred to earlier.

Good question about sales compensation. The comp model works against how a customer is paying for it, not how it is delivered.

What are the biggest challenges in processing transactions in a hosted environment? Didn’t answer, but said that most of the technical issues have gone away as a result of web services.

Comment about whether or not any customers have moved over to Siebel or some other big CRM app. He says no, that they have poached customers from Siebel. However, in further discussion he does indicate something along the lines of they do lose to Siebel occassionally.

Ross asks a question about customers demanding on premise for security and single signon. Greg answers that they have had issues on performance that drove customers to want on-premise, and then goes on to say that they shipped a rich client pre-AJAX (which I guess means they built it in DHTML).

What’s the strategy for building a partner network? Different for hosted versus on premise deployments. Greg answers that direct selling is the way to go to market so that would suggest he is not building out a reseller network.

What does he worry about? That Salesforce.com fixes their reliability issues.

CoComment

I have been trying the new CoComment service but having a little bit of difficulty. On a positive note, it’s a hell of a good idea, I am constantly losing track of what blogs I post comments on.

1) I constantly forget to click on the cocomment bookmarklet before submitting a comment
2) it doesn’t work on all blogs

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Can’t get no SaaSifaction

The first session of the Enterprise Software Summit focused in on SaaS, which is a topic probably on the boilerplate for all conferences focused on enterprise software these days.

The group discussion that ensued was really good and touched on a broad array of topics. On one level I am surprised that anyone would even suggest that there is a debate about SaaS but it’s entirely apparent that there is a lot of confusion about what SaaS really is.

On one level SaaS is assumed to be straight up “salesforce.com”, which is of course a software application that is delivered as a subscription service. However, this is not only a simplistic definition, it is also in accurate to suggest that SaaS is limited to what SFdC is doing.

The enterprise software industry as a whole started a migration to SaaS as embodied by SOA well over 3 years ago. Any debate that is remaining has to do with how SaaS will be realized. On one end of the spectrum are those that argue that all software should be delivered as a service by a third party who provides that service as some kind of subscription licensing model. On the other end are those that say software should remain an on-premise implemented package of “stuff” that is knitted together with SOA principles.

In the middle of this debate are people like myself who want enterprise software delivered in multiple channels and embracing of the principles of Soa as opposed to soA. What I mean by that is the distinction between those who want to build software the way that they always have, except now they want to use all the SOA labeled technologies, and what I think is the endgame, building applications that are highly personalized based on application services that are provided by a multitude of vendors. The former is soA while my preference is Soa.

Whether an application is delivered as a service or as an on-premise installed application is something best left to customer choice. I like hosted models, and would prefer that the industry move forward on multiple flavors of hosted model, whether multi-tenancy or some kind of hybrid that shares a common code base but enables componentry extension or outright replacement. I think this is kind of what SAP is hoping to accomplish with our on demand CRM offering launched last week, but in all honesty I was disappointed in that launch because it sounded too much like us telling customers that when they “grew up” they could graduate to the “grown up table with full blown CRM”. This misses the point, but it’s better than what we were offering the week before – nada, zip, zero.

To summarize the point that I just made about confusion on SaaS, it’s clear that there is a SaaS development track, a software delivery model choice, an economic licensing/support model, and a broad data/process integration issue that underlies all of the above.

The other topic that we spent alot of time talking about this morning was how centralized IT is not the way companies are going to market anymore. I don’t think it would surprise anyone to suggest that while centralized big company IT is something that is very necessary, it is also not the place you go for innovative forward looking applications, at least as a user or business manager you don’t go there.

What is happening increasingly is that divisions and departments are exercising their ability to deploy packaged applications as a hosted service or an appliance and sidestepping IT. A number of the companies in the room today testified about how they were going to market with a departmental sell and quite honestly I think this trend will not only continue but accelerate as packaged applications become more “packaged” and much cheaper due to commoditization of infrastructure technology. This is probably bad for SAP in the long run because we are forced to fight a battle with multiple fronts, not only competing against competitors but also hardened departmental projects that not only are “there” but also working.

Lastly, while it wasn’t proclaimed outright in the session this morning I think a lot of people are quick to think that enterprise software as it has existed is dead. Not only is this conclusion not based in history (hell, there’s still a big business in developing AS/400 software and IBM hasn’t sold one of those boxes in years) but it also presums that incumbant vendors haven’t prepared for the shift in how software is built and delivered. Enterprise software is notoriously difficult to predict, I remember back in 1995 the raging debate was all about who’s flavor of client/server was going to win and then Netscape came along, of course it took the better part of 3 years for full blown web-based enterprise software to happen but it did.

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Layoffs at Siebel last Friday

Here’s an update on layoffs that are going on at Siebel.

Anyone who didn’t get an offer last Friday was walked out of the office. For the full-time employees who joined Siebel prior to the acquisition announcement, there was fairly generous severence package. Siebel put a “Change of Control” benefit program in place last May, so we knew the package we would get if we weren’t retained post-sale.

By the way, we are hiring.

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FON, what are the issues?

Lot’s of news about FON getting funding, even more so given that Google is part of the syndicate. Paul emailed me this morning, saying:

“With Skype and Google, this could really get traction.  I’ve been following FON for a while and thought it was interesting but risky, now with Google and Skype, I think ubiquitous WiFi could be possible.”

I responded back that I think the issues are less technical in nature, more regulatory in nature with the trend in increasing federal, state and local regulations with regard to wireless network operation and access. And there are international public spectrum regulations as well.

The other factor that must have been considered is how the telco oligopoly in the U.S. threatens innovation, development and deployment of technologies like this. Over the last couple of decades we, consumers, have benefited from the telcos still thinking they were in the voice communication over landline or cellular business. As a result technologies like Wifi were able to develop without the telcos boots on it’s neck, but going forward it would appear that the executive suites in every major telco in the U.S. have figured out that they are competing not against each other but innovation itself. Ironically, the one area where regulation should be helping consumers, the 1996 Telecommunications Act, has really been a failure because nobody is enforcing the spirit of the law.

Lastly, there is one technical issue that I am curious about and that is how the public spectrum scales in the mass market with deployment of something like FON.

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