RightNow Technologies: Blue Skies in Big Sky | AMR Research
RightNow Technologies: Blue Skies in Big Sky | AMR Research
If you’ve ever dreamed of fly-fishing in Montana or watching bison and elk roam across 2.2 million acres in Yellowstone National Park, you might want to add Bozeman to your wish list of destinations. The natural beauty is majestic. The city is surrounded by the Bridger Mountains, Tobacco Root Mountains, Big Belt Mountains, the Hyalites, the Spanish Peaks, and Gallatin Range.
Residents and visitors have easy access to three rivers: Gallatin, Madison, and Yellowstone. If you remember the 1992 movie, “A River Runs Through It,” some of Brad Pitt’s fishing scenes were filmed on the Yellowstone River in Paradise Valley and the Gallatin River south of Bozeman.
The natives like to brag that Bozeman has 300 days of sunshine. We can’t verify that, though. While we were there we experienced about 10 minutes of sun, followed by torrential rain, thunder and lightning, a brief hailstorm, some light snow, and more rain. Despite the inclement weather, I would go back in a second. Some say the best time to go is in winter. While there’s great skiing nearby in Big Sky, I’m especially intrigued by the idea of a night snowmobile trip through Yellowstone to see Old Faithful. Want to come along?
Big Sky’s appeal and the RightNow brand
The reason for including the travelogue is to link the appeal of Big Sky (the slogan on Montana’s license plates says “Big Sky Country”) to the RightNow brand, a point I discussed with Greg Gianforte, RightNow’s founder and CEO. There is a kind of rugged, fresh-air, blue-sky feel to the place that would seem to be a natural fit with a provider of sturdy software. In fact, I asked Mr. Gianforte about the company’s close rate when he hosts prospects in Bozeman. He smiled and said, “It’s very good.”
Mr. Gianforte started the company in 1997. Over the last decade, it has emerged as a leading provider of “consumer-centric CRM,” with more than 1,800 customers worldwide. The RightNow product set includes sales, service, marketing, feedback, and analytics served up in a software-as-a-service (SaaS) offering. In the past, the company also sold its software in the traditional perpetual license mode. It switched to SaaS-only at the end of last year.
“Consumer-centric” may be a bit of a misnomer as it could be interpreted as just business-to-consumer, or B2C as it was called during the dot-com daze. In addition to B2C, the customer base includes business-to-business-to consumers (such as Nikon selling to retailers selling to consumers), schools-to-student, and governments-to-citizens.
RightNow closed 2006 with $110M in revenue. Of this, nearly $70M came from recurring revenue from SaaS deals. The recurring revenue base has been growing at 38% annually for the 13 quarters. The company typically offers its software via two-year license agreements. Renewals run close to 100%. At the end of 1Q07, the company said that it expected FY07 revenue to be in the range of $116M to $120M. While this looks like a modest increase from FY06, it’s not apples-to-apples. The shift to an all SaaS model increases deferred revenue at the expense of upfront sales.
While SaaS is lauded as a faster and less expensive deployment model for buyers, there are a lot of advantages for the vendor, too. Product development cycles are accelerated. RightNow produces a new release each quarter. Product quality is better, with smaller batches to test. Developer productivity is enhanced as well—faster results for the developer. In addition, smaller, more compact releases prevent or slow the scope creep that accompanies mammoth releases as a compensation for tardiness.
Land and expand: get started for under $100K, grow to $MM
Mr. Gianforte described RightNow’s sales strategy as “land and expand.” For example, a retailer might start with multichannel functionality, a government agency with e-service, or a university with recruitment management. Looking back at customer purchase activity, RightNow discovered that an average customer places six to seven orders in the first three and a half years. Many start by spending less than $100K. Over time, some grow to multimillion dollar accounts.
While salesforce.com tracks “page views” as one of its metrics for adoption and expansions, RightNow monitors “customer interactions.” This includes phone calls, e-mails, chat, and self-service sessions. Last year, RightNow’s software managed more than a billion interactions. In 1Q07, the company’s software managed 352 million transactions. This growth in usage should reinforce the high renewal rates too.
While SaaS is usually linked to sales to small and midsize businesses, 36% of RightNow’s revenue comes from companies with more than $1B in annual sales. Another 10% are derived from government sales; the company boasts an impressive line up of federal customers, with 3% more coming from education, including large universities. If you add universities and government to the $1B-plus customers, about half of the company’s revenue comes from large enterprises.
The new story: RightNow goes vertical, needs to think diagonal
RightNow has always had a diverse customer base. High-tech companies make up the largest bloc at 20%, followed by public sector (14%), retail/consumer products (11%), services (11%), telecommunications (8%), financial services (7%), manufacturing (5%), entertainment (5%), travel and hospitality (4%), and “other” (15%).
In March, the company rolled out RightNow Higher Education, the first of three announced industry-specific products. This was followed by the April launch of RightNow Federal Government and the May debut of RightNow Retail. RightNow Telecom should follow later this month. Support for other industries is underway.
We spent an hour or so reviewing the vertical strategy. This involved reviewing many of the brand names in each industry. I was struck by the overlap with SAP customers. Many SAP customers have deployed RightNow for multichannel and customer service. What may have started as a point product, has blossomed into a suite of software. The next step for RightNow should be to build a diagonal strategy for providing additional functionality to support the specific ERP implementations.
Mr. Gianforte’s new book: “Eight to Great”
Two years ago, Mr. Gianforte co-authored “Bootstrapping Your Business: Start and Grow a Successful Company with Almost No Money.” He shared with us his latest opus: “The Customer Experience Imperative: Keeping Today’s Hyper-Demanding Customers Satisfied and Loyal.”
In our meeting in Bozeman, the company walked us through the “eight steps to great customer experience,” which is at the heart of the book. This prompted Rob Bois, our director of CRM research, to suggest that Mr. Gianforte change the name of his new book to “Eight to Great,” a not-so-subtle takeoff from the best-selling “Good to Great” work by Jim Collins.
Ongoing challenge: Getting good help in Bozeman
Based on my opening paragraphs, I could be a potential candidate for the Bozeman Chamber of Commerce. Hiring employees there is a challenge, though. For one, Bozeman is a small city, with only 30,000 residents. The nearest big city is Salt Lake City, six hours away. Real estate prices are surprisingly high due to an influx of newcomers from California and other states who are relocating here or making the city a second home – residents have nicknamed the city Boz Angeles (or Boze Angeles). When we were in town, the local paper noted that the cost of living in Bozeman exceeded the national average.
When Mr. Gianforte decided to move to Montana from the east coast, he selected Bozeman because it is home to Montana State University. MSU has the best engineering and business programs in the state. He has teamed with the school to try and lure some of its graduates back to Bozeman. In an article in The Wall Street Journal (June 4), Mr. Gianforte told how he use to mail postcards to a list of 565 graduates that the school had given him. The spring postcards had pictures of backpackers, while the winter version featured skiers. Both carried the tagline, “We’d like you to consider coming home.” He continues the practice today, though he now sends out letters instead.
Today, Bozeman is home to 400 or so employees out of the more than 700 that work for the company. They work on a five-building campus that looks more like a college setting, albeit with better woodworking and furnishings. The rest of the employees are spread around the globe.
While still small relative to the big ERP vendors, we left the meetings with a sense that the company had serious growth plans and a detailed strategy for reaching its targets. Despite the weather we experienced, it looks like nothing but blue skies ahead.
Next week: back to Arizona
We experienced all four seasons during our two days in Bozeman. That won’t be the case in Phoenix. Temperatures will be in the 99-104 degree range, or more than twice what we experienced in Montana. We will be out to attend Progress Software’s Partner Exchange and to meet with JDA Software. Look for our analysis next week.
In the meantime, let me know if you want to know more about RightNow and consumer-centric CRM, or if you want to sign up for the snowmobile trip to Yellowstone, or if you need to know the best place in Bozeman to watch the Red Sox—brichardson@amrresearch.com.
If you’ve ever dreamed of fly-fishing in Montana or watching bison and elk roam across 2.2 million acres in Yellowstone National Park, you might want to add Bozeman to your wish list of destinations. The natural beauty is majestic. The city is surrounded by the Bridger Mountains, Tobacco Root Mountains, Big Belt Mountains, the Hyalites, the Spanish Peaks, and Gallatin Range.
Residents and visitors have easy access to three rivers: Gallatin, Madison, and Yellowstone. If you remember the 1992 movie, “A River Runs Through It,” some of Brad Pitt’s fishing scenes were filmed on the Yellowstone River in Paradise Valley and the Gallatin River south of Bozeman.
The natives like to brag that Bozeman has 300 days of sunshine. We can’t verify that, though. While we were there we experienced about 10 minutes of sun, followed by torrential rain, thunder and lightning, a brief hailstorm, some light snow, and more rain. Despite the inclement weather, I would go back in a second. Some say the best time to go is in winter. While there’s great skiing nearby in Big Sky, I’m especially intrigued by the idea of a night snowmobile trip through Yellowstone to see Old Faithful. Want to come along?
Big Sky’s appeal and the RightNow brand
The reason for including the travelogue is to link the appeal of Big Sky (the slogan on Montana’s license plates says “Big Sky Country”) to the RightNow brand, a point I discussed with Greg Gianforte, RightNow’s founder and CEO. There is a kind of rugged, fresh-air, blue-sky feel to the place that would seem to be a natural fit with a provider of sturdy software. In fact, I asked Mr. Gianforte about the company’s close rate when he hosts prospects in Bozeman. He smiled and said, “It’s very good.”
Mr. Gianforte started the company in 1997. Over the last decade, it has emerged as a leading provider of “consumer-centric CRM,” with more than 1,800 customers worldwide. The RightNow product set includes sales, service, marketing, feedback, and analytics served up in a software-as-a-service (SaaS) offering. In the past, the company also sold its software in the traditional perpetual license mode. It switched to SaaS-only at the end of last year.
“Consumer-centric” may be a bit of a misnomer as it could be interpreted as just business-to-consumer, or B2C as it was called during the dot-com daze. In addition to B2C, the customer base includes business-to-business-to consumers (such as Nikon selling to retailers selling to consumers), schools-to-student, and governments-to-citizens.
RightNow closed 2006 with $110M in revenue. Of this, nearly $70M came from recurring revenue from SaaS deals. The recurring revenue base has been growing at 38% annually for the 13 quarters. The company typically offers its software via two-year license agreements. Renewals run close to 100%. At the end of 1Q07, the company said that it expected FY07 revenue to be in the range of $116M to $120M. While this looks like a modest increase from FY06, it’s not apples-to-apples. The shift to an all SaaS model increases deferred revenue at the expense of upfront sales.
While SaaS is lauded as a faster and less expensive deployment model for buyers, there are a lot of advantages for the vendor, too. Product development cycles are accelerated. RightNow produces a new release each quarter. Product quality is better, with smaller batches to test. Developer productivity is enhanced as well—faster results for the developer. In addition, smaller, more compact releases prevent or slow the scope creep that accompanies mammoth releases as a compensation for tardiness.
Land and expand: get started for under $100K, grow to $MM
Mr. Gianforte described RightNow’s sales strategy as “land and expand.” For example, a retailer might start with multichannel functionality, a government agency with e-service, or a university with recruitment management. Looking back at customer purchase activity, RightNow discovered that an average customer places six to seven orders in the first three and a half years. Many start by spending less than $100K. Over time, some grow to multimillion dollar accounts.
While salesforce.com tracks “page views” as one of its metrics for adoption and expansions, RightNow monitors “customer interactions.” This includes phone calls, e-mails, chat, and self-service sessions. Last year, RightNow’s software managed more than a billion interactions. In 1Q07, the company’s software managed 352 million transactions. This growth in usage should reinforce the high renewal rates too.
While SaaS is usually linked to sales to small and midsize businesses, 36% of RightNow’s revenue comes from companies with more than $1B in annual sales. Another 10% are derived from government sales; the company boasts an impressive line up of federal customers, with 3% more coming from education, including large universities. If you add universities and government to the $1B-plus customers, about half of the company’s revenue comes from large enterprises.
The new story: RightNow goes vertical, needs to think diagonal
RightNow has always had a diverse customer base. High-tech companies make up the largest bloc at 20%, followed by public sector (14%), retail/consumer products (11%), services (11%), telecommunications (8%), financial services (7%), manufacturing (5%), entertainment (5%), travel and hospitality (4%), and “other” (15%).
In March, the company rolled out RightNow Higher Education, the first of three announced industry-specific products. This was followed by the April launch of RightNow Federal Government and the May debut of RightNow Retail. RightNow Telecom should follow later this month. Support for other industries is underway.
We spent an hour or so reviewing the vertical strategy. This involved reviewing many of the brand names in each industry. I was struck by the overlap with SAP customers. Many SAP customers have deployed RightNow for multichannel and customer service. What may have started as a point product, has blossomed into a suite of software. The next step for RightNow should be to build a diagonal strategy for providing additional functionality to support the specific ERP implementations.
Mr. Gianforte’s new book: “Eight to Great”
Two years ago, Mr. Gianforte co-authored “Bootstrapping Your Business: Start and Grow a Successful Company with Almost No Money.” He shared with us his latest opus: “The Customer Experience Imperative: Keeping Today’s Hyper-Demanding Customers Satisfied and Loyal.”
In our meeting in Bozeman, the company walked us through the “eight steps to great customer experience,” which is at the heart of the book. This prompted Rob Bois, our director of CRM research, to suggest that Mr. Gianforte change the name of his new book to “Eight to Great,” a not-so-subtle takeoff from the best-selling “Good to Great” work by Jim Collins.
Ongoing challenge: Getting good help in Bozeman
Based on my opening paragraphs, I could be a potential candidate for the Bozeman Chamber of Commerce. Hiring employees there is a challenge, though. For one, Bozeman is a small city, with only 30,000 residents. The nearest big city is Salt Lake City, six hours away. Real estate prices are surprisingly high due to an influx of newcomers from California and other states who are relocating here or making the city a second home – residents have nicknamed the city Boz Angeles (or Boze Angeles). When we were in town, the local paper noted that the cost of living in Bozeman exceeded the national average.
When Mr. Gianforte decided to move to Montana from the east coast, he selected Bozeman because it is home to Montana State University. MSU has the best engineering and business programs in the state. He has teamed with the school to try and lure some of its graduates back to Bozeman. In an article in The Wall Street Journal (June 4), Mr. Gianforte told how he use to mail postcards to a list of 565 graduates that the school had given him. The spring postcards had pictures of backpackers, while the winter version featured skiers. Both carried the tagline, “We’d like you to consider coming home.” He continues the practice today, though he now sends out letters instead.
Today, Bozeman is home to 400 or so employees out of the more than 700 that work for the company. They work on a five-building campus that looks more like a college setting, albeit with better woodworking and furnishings. The rest of the employees are spread around the globe.
While still small relative to the big ERP vendors, we left the meetings with a sense that the company had serious growth plans and a detailed strategy for reaching its targets. Despite the weather we experienced, it looks like nothing but blue skies ahead.
Next week: back to Arizona
We experienced all four seasons during our two days in Bozeman. That won’t be the case in Phoenix. Temperatures will be in the 99-104 degree range, or more than twice what we experienced in Montana. We will be out to attend Progress Software’s Partner Exchange and to meet with JDA Software. Look for our analysis next week.
In the meantime, let me know if you want to know more about RightNow and consumer-centric CRM, or if you want to sign up for the snowmobile trip to Yellowstone, or if you need to know the best place in Bozeman to watch the Red Sox—brichardson@amrresearch.com.
posted by Albert van Grondelle at 12:48 AM
1 Comments:
Well said.
Post a Comment
<< Home