RightNow CEO on Improving the Customer Experience

For Greg Gianforte and his colleagues at Bozeman, MT, based RightNow Technologies, Inc., customer relationship management is so, well, yesterday. The key focus for companies today, Gianforte told IDG Enterprise Chief Content Officer John Gallant in this installment of the IDGE CEO Interview Series, is dramatically improving the ‘customer experience’ in all the places consumers touch organizations — from the Web to the call center.

Gianforte committed to the cloud delivery model early in the game, but he’s an outspoken critic of how many software-as-a-service (SaaS) vendors deal with customers and his firm is pioneering contract terms that make it easier for customers to pilot and expand their use of RightNow’s customer experience suite with less risk and expense. In this discussion, he lays out how a customer-experience centered approach to business can change your company and what questions IT leaders should be asking their cloud providers today.

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You founded Brightwork Development, a network management company that was acquired by McAfee in 1994. How does a net management guy all focused on the infrastructure get himself caught up in the cloud?

The genesis for RightNow was the realization that consumer expectations were changing and the Internet was disrupting how consumer businesses differentiate themselves. It’s harder and harder for companies to differentiate by just adding more features and they can’t differentiate on price and make any money.

I’ve done 140 visits so far this year with senior executives at large B-to-C firms and when I ask them what they’re working on one [key thing] is always improving the customer experience. Companies are realizing that, in terms of sustainable differentiation, it’s the only lever they have to pull. We saw the Internet disrupting that and creating an opportunity. [Improving the customer experience] is something that begs for automation and we saw an opportunity in that.

Before we get into an overview and explanation of the specific capabilities that RightNow offers in your suite, explain this concept of customer experience software and how it’s different from customer relationship management (CRM).

CRM historically has been about sales force automation, contact center or marketing automation — it’s primarily focused on making company employees more efficient. It is an inward-facing business application. Customer experience includes all that, but it also includes the consumer-facing components, such as that we help companies increase their presence through their Facebook fan pages or add self-service capabilities on the external pages. In fact, the sites we run on behalf of our clients, if you aggregate all the traffic together, we’re one of the 100 largest Websites in the world. That wouldn’t happen if it was CRM; it only happens if you’re doing customer experience.

What don’t CRM vendors get about customer experience?

We replace a lot of failed Siebel implementations. I’ve done that at Nike Worldwide, Sony in Europe and North America. Those systems have deficiencies: they’re hard to install and expensive to maintain but they also don’t do multi-channel really well. Consumer expectations keep rising and the people that Tweet about us are the same people who send us e-mails, are the same people that want to chat with us, are the same people that call our call centers. Traditional CRM doesn’t handle that cross-channel flexibility very well. That’s one dimension that’s different.

The second dimension is that traditional CRM typically does not include integrated knowledge management and the ability to deliver effective self-service capabilities on a company’s Website or through mobile devices or over Facebook. We started in self-service and knowledge management. Typically when we install for a client, we’re eliminating 30% to 50% of inbound e-mails and 10% to 20% of the phone call volume in a matter of weeks. We’ve done this for Wal-Mart, for Nikon, for lots of brands you’re familiar with. We also run self- service for many government agencies, like the Social Security Administration and Medicare. Traditional CRM just doesn’t do that.

The last dimension, the third one I’ll note is that traditional CRM has not integrated the newer social channels very well — particularly around discussion forums for consumer insight, for implementing enterprise feedback management. Having that as part of an integrated platform means that a company can take better care of their customers so they can keep them, they can cut their costs by making their contact center more efficient and they can drive incremental revenue as well.

Let’s talk specifically now about what RightNow offers. What capabilities are in the suite and how do you sell those to people?

We’re 100% in the cloud, 100% subscription based and very much focused on business value creation. We say we deal with the three experiences that really matter. The Web and mobile experience is category one. Second is the social experiences and the third is the contact center. Gartner [Group} has Magic Quadrants in each one of those areas and we’re the only vendor that’s on all three charts. We’re in the leader quadrant on two. We’re near leader quadrant on the third.

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In the Web and mobile experience, what we actually deliver is basically everything under the self-help button on the Web page — the submission forms, knowledge base, self service, e-mail management, live chat for either diagnostic and customer care or to up-sell/cross-sell. We’re also on the homepage to help with conversion offers to drive revenue.

In social, we help people with online forums for call deflection related to support, customer insight with capabilities for extending Facebook — adding the same kind of e-service capabilities that we’ve been delivering on the Web for 14 years inside a fan page. We can connect Twitter back to the contact center for work flow and process management.

In the contact center, the third category, we’re ranked right behind Oracle/Siebel on the Magic Quadrant and ahead of everybody else, way up in the leader quadrant. We’re focused on the agent desktop in the call centers. This is incident management, case management, work flow, scripting, in the contact center. Contact center is about 50% of our revenue. The Web experience is about 40% and the remainder is in the social category.

Give me one great customer story. Tell me about a customer who’s changed their business using your product.

I think about Overstock.com. They’re an online retailer, about a billion dollars in revenue. The National Retail Association does an annual survey of client satisfaction and the year prior to deploying us, they were not listed in the top 150 retailers based on client satisfaction. We implemented and the next year they were number four on the list, they then were number four one more year, then they jumped to number two of all retailers in the U.S. Now, they did some internal operational changes and other things in addition to using our technology, but their CFO said on their earnings call that “our earnings are up because RightNow technologies is saving us a million dollars a month and our client satisfaction is up because of this cross-channel customer experience approach.”

What specific things were they able to do that they weren’t able to do before deploying your product?

People come to Web pages hoping to find an answer to their question, nobody goes to a Web page hoping to send an e-mail. With the core intellectual property we have in our knowledge base our system is better than any other system in the marketplace in anticipating and predicting what questions people are going to ask. So that was step one — providing self-service capability that allowed people to get immediate answers so they can buy more, or answer their questions quickly so they are more satisfied. If they did need to do an escalation, we also provided the agent desktop in the call center. Generally when our contact center solution is put in place, agent productivity tends to jump by 15%. Training times are reduced because the context, the knowledge base, is integrated with the desktop and because of the much-more-sophisticated work flow capabilities. We have a work space designer that IT organizations really love because just by dragging and dropping they can lay out work places for the agents without having to send people to weeks or months of training.

What’s the competitive set you deal with on a day-to-day basis?

In the Web category, we are the world leader. Our quarterly sales exceed the combined market capitalization [of competitors in that market]. I don’t mean to brag but we won there. In the contact center, we’re typically seeing legacy systems: Siebel, Clarify, Vantive. We’re the only cloud-based solution. Now salesforce.com is attempting to enter that space with their Service Cloud offering, but our competitive win rate against salesforce.com is extremely high. We just won all the business at Yahoo, in large part because of our work flow. In the larger B-to-C contact centers, over a couple hundred seats, there’s a level of sophistication that’s required that’s not available in other cloud-based solutions, so that’s why we win there. In social, for forums, we typically see Jive or Lithium.

You have had some pretty significant growth. What are the pain points that are driving customers to you? When does somebody say, this is a solution that I need?

This is one of the benefits of cloud-based computing — you can start small and grow. There are 35 applications in our suite, but we typically start with a client with one or two of those. With traditional on-premise software, particularly if you try to put in Siebel, you’re talking about 18 to 24 months, maybe longer, before you see any business benefit. Our average deployment is 60 to 90 days and because there’s no data center stuff to set up, it’s all in the cloud, proof of concepts or pilots are very easy. We jokingly say we have an unfair advantage in the marketplace because our products actually work. We can allow customers to try them. In fact, our preferred engagement model is to eliminate as much risk for the customer as possible. Put our money where our mouth is.

The traditional software vendors, they find out you have a headache and they want to do brain surgery. Our approach is to come in and give you an aspirin. Within weeks or a couple of months the headache has gone away. Then we earn the right to come back in and do the next piece. We gain a big advantage from our engagement model. It’s very different than traditional software vendors, the way they try to boil the ocean.

The business pain point tends to be something related to customer experience. It’s ‘our return rates are too high.’ Or maybe they have a home- grown application in their call center where the wheels are starting to come off. Or they want to drive more online revenue. It’s these sorts of business problems that we typically engage and then we work directly with the IT organizations to make sure the project is successful.

Speaking of the cloud and SaaS, in specific, you’ve been pretty vocal about problems customers have in their dealings with SaaS vendors. What’s wrong with the kind of deals people are signing and what do you think they should be doing better?

The industry innovated for 10 years around this delivery model of moving stuff into the cloud but we dragged along all the worst aspects of enterprise software licensing. So about two years ago, we adopted our Cloud Services Agreement, which is really a new standard for contracting; it puts all the power in the customer’s hands. It recognizes that this is really a subscription service. You’re not paying a lot of capital here, so the customer needs control. We believe that customers shouldn’t be forced to buy software they’re not actually going to use. So in our standard agreement, we allow them to scale capacity up or down on an annual basis, without penalty. I mentioned Overstock.com earlier, they run something over 1,000 agents during their busy period and the rest of the year they only have 400 agents. A typical software vendor is going to require them to buy over a thousand seats of the contact center software for the full year even though theyre not using it. Under our CSA, you buy seat months and you consume them, so it allows companies to deal with seasonality. We provide the ability for the people to terminate for convenience on an annual basis but we provide price certainty for 6 years, so people don’t get nickel and dimed or held over the barrel.

We just think that the cloud industry can do a better job in respecting the rights of the customer. We’ve done a good job as an industry on the delivery side but again, we’ve brought these kind of awful contracting practices with us. In fact, we’ve had some clients come back and say, “Geez, I’m going to use this CSA as a standard for all my vendors.” It doesn’t actually make the other vendors very happy but we think if your products work and you’re willing to stand behind them, there’s really no risk in putting these things in a standard agreement.

What are the questions the customer should be asking of their cloud providers?

They ought to know about price certainty. They might only be signing a one-year agreement so they don’t think they are risking very much, but once these systems get installed, they’re as sticky as traditional on-premise. It might be a little easier switch but not as easy as people might want to think. It’s not like you just throw a switch on an enterprise application. If you’re only signing a one-year agreement, sure you’re not committing that much but once the thing is embedded, do you know what you’re pricing is going to be in year four or five or six? That’s an important question.

A second question is around security and reliability, particularly with Sarbanes-Oxley and a lot of the compliance requirements in large enterprise. This is a big concern to IT organizations. We were really the first cloud applications company to get a majority of our revenue from companies over a billion dollars in revenue and large government agencies. We’re probably further ahead in our security and compliance work than a lot of other SaaS firms and certainly we’ve done things that other firms haven’t even had to think about. For example, full HIPAA compliance, PCI compliance for the companies that need that, DIACAP certification for the Department of Defense. We’re the first vendor to have a fully, multi-tenant deployment from the Department of Defense. We run that for Air Force, the Marines and a bunch of different people. Those are some of the things that clients ought to be asking about. And again, the flexibility items we talked about with the contracts.

What does the future hold for RightNow? How do you see the suite expanding? What kinds of capabilities do you think you need to add or provide in the future?

Our market top opportunity in the marketplace is the customer experience problem in large B-to-C organizations and it’s going to be the problem for quite a while. We’ve spent 14 years building out this solution set. I think the biggest opportunity we have in the market is actually expanding our distribution capability, our sales capability. I brought a new President in last year, Wayne Huyard. He was the President of MCI [Mass Markets], started there as a sales guy and after 23 years was the president. He has a history of scaling up businesses. We have more advanced technology than really anybody else in this customer experience base and we win way more than our fair share of engagements. The problem we have is we’re not in all the engagements. So, we have to have more feet on the street. Of the 2,000 clients we serve today, just in those existing customers, there are 6,000 divisions that we haven’t even called on yet. So I could put hundreds of additional sales people to work, productively, even if I never sold another customer and never introduced another product. Now clearly we’re not doing that. That would allow us potentially to increase the size of our business 5X, just with the existing solutions we have today.

The innovation for us is really in the area of social, integrating social across the entire customer experience and connecting it to the work flow back in the business, and also around mobile. One of our clients, Match.com, is now responsible for 4% of all the marriages in the U.S. We run all their online care and over 30% of their traffic is coming from mobile devices today. We need to adapt. In another year there’s going to be more mobile devices with Internet access than there will be PC’s with browsers. This is the new Internet access device and we need systems, particularly from a customer experience perspective, that accommodate and embrace that.

How do you see the SaaS market evolving?

Well, this may sound a little odd but I think the whole SaaS cloud marketplace is going to go away entirely.

In what sense?

In the sense that it will just become the software industry. The cloud delivery model eliminates 80% of the ownership costs and allows systems go in five times faster. It is such a slippery slope that as viable solutions become available in each software category — whether it’s human capital management or ERP or customer experience or CRM — the on-premise options just become massively disadvantaged and they’re going to atrophy and go away. In early stage growth and markets, you see immature products in certain categories that are harder to integrate. But the questions that IT organizations are asking of their on-premise vendors, they should be asking exactly the same questions of their cloud vendors. If they don’t get reasonable answers, they shouldn’t be deploying them yet.

You’re an East Coast guy. What are you doing out there in Big Sky country?

My wife grew up in Queens, New York, and I grew up in Philadelphia. When our oldest son was going into first grade I had been running the North American business for McAfee after I sold Brightwork to them and I realized that in a very real sense the Internet had removed geography as a constraint. The question, when I moved out here, was can you build a world-class business in a rural location? And the answer is yes, if you have a good engineering school nearby. Today, we’re the largest commercial employer in Bozeman. We’ve got almost 1,100 employees around the world, half of which are in Bozeman. It’s been a tremendous advantage for us. I’ve run businesses on both coasts and, by far, this is a better location.

In one sentence or so, what’s the key take-away for IT executives about RightNow?

We are the only company that is solely focused on helping large business-to-consumer organizations deliver better experiences over all the channels through which they touch their customers. If they are struggling with a failed Siebel deployment, we typically can deploy our solution for less than their annual maintenance cost on the Siebel system.

In the IDG Enterprise CEO Interview Series, you’ll hear from technology CEOs on today’s burgeoning trends, ongoing headaches and upcoming product plans. Check out more in this informative series from IDG Enterprise Chief Content Officer John Gallant and his team of editors.