RightNow and the Future

RightNow Technologies certainly has come a long way in the last 10 years, and the company used its industry influencers day in Colorado Springs this week to remind us.

I saw the day as a marker of a turning point in the company’s development, a time when it said to the world, “The first phase of life is over, now let us tell you what’s in store next.”

My big takeaways:

1. The company is generating cash and will continue to improve margins, which will propel it to its next phase.
2. RightNow has staffed up with lots of industry veterans who will help to drive future success.
3. RightNow believes its suite of customer service solutions is substantially complete, and it will soon begin concentrating on accelerating sales and marketing.

Hale and Hearty Finances

Since this was a day for both industry and financial analysts, there was a good amount of discussion about the company’s finances. The men and women in black asked penetrating questions about margins, strategies and how the financial sausage was made. From the answers, I deduced that things are good.

Even before CFO Jeff Davison spoke, the company had made several announcements, including revising its advice to the street about Q3 2010 financials. The unaudited — and don’t hold me to it — numbers look like this: about US$48 million in revenue, up from advice of $45 million and up 24 percent over the same quarter last year. Not too shabby, and apparently I was not the only one thinking this because the stock went north by about three and a half for the day, most of it in the morning.

So the company has good cash flow. But more importantly, more of the cash is margin. According to CEO Greg Gianforte, the company embarked on a four-year plan two years ago to boost its margins. Halfway through the exercise, it looks like they will hit their target of 18 to 22 percent operating margins. This single example gives me the impression that RNOW is a well-run organization.

New Names on Roster

Also pre-announced, Wayne Huyard was appointed president and chief operating officer. Huyard has a 25-year track record, mostly at MCI, in leading sales and operations, and he looks like a good fit for the team. The company has also acquired numerous industry veterans over the past few years injecting significant business experience into all the key areas. We were treated to a panel discussion with the VPs of the centers of excellence later in the morning, and each of them knows their stuff.

Beyond Gianforte, Davison and marketing ninja Jason Mittelstaedt, other heavies included Brian Kern, VP of Web experience; John Kembel, acquired from Best Buy, VP of social solutions who came over in the HiveLive acquisition; Ted Bray, VP of contact center; Shon Wedde, director of platform solutions; Chris Hamilton, VP of customer feedback; and more that my notes don’t cover.

But back to the boss. Before any of the leaders of RightNow’s centers of excellence spoke, Gianforte gave a succinct and well-reasoned overview of the market and his company’s opportunities. He sees a 10-fold growth opportunity for the company in seven verticals, making up a universe of about 3,000 companies. The sweet spots for this expansion are companies in business-to-consumer, government-to-consumer and higher education-to-student markets.

This universe includes many companies that might be missed by a more traditional call center approach focused on telecommunications and banking (though each is important). Some of RightNow’s most interesting customers, such as EA Games, are well outside of that box and offer an intriguing peek into the future, not just of RightNow but of our society as we further socialize and become even more addicted to our mobile devices.

Driving Demand

Interestingly, in discussing his land and expand strategy, Gianforte revealed that the average customer places six to eight orders in the first three years of a relationship — quite an accomplishment for any software company, and aided no doubt by the cloud model.

Finally, there are the four drivers Gianforte said are stoking demand — customer empowerment, cloud computing, proliferating online interactions and the contact center replacement cycle. He says all drivers point to adoption of light, lithe and above all smart systems, which the company has worked to deliver.

If there was a fly in the ointment, it might have been when the CEO said “The solution is basically done.” Gianforte no doubt meant that the suite of tools needed to support his vision of customer service is complete, and he modified the statement to include the idea that there may be additions and acquisitions in the future. But net/net, he has the suite he wants to go to war with. This is a significant revelation, because in confluence with achieving his operating margin goals, it means the company will soon spend more on sales and marketing. When that happens, look for the company’s growth to accelerate.

So, all in all, RightNow’s influencer meeting was successful in communicating these points and outlining a bright future for the company. RightNow is at a turning point and you can see it. The customers are happy, they continue to buy and the financial analysts apparently liked much of what they heard. As the company completes its objectives for margin and turns its attention to faster growth, we could be witnessing the beginning of a spurt that delivers the second billion-dollar cloud company.