New model for enterprise software contracts?

I wouldn’t normally re-blog someone else’s work. But this is worth reading.

Frank Scavo, on his Enterprise System Spectator blog, gives detailed coverage to a new style of service contract being offered by a small Cloud software company, RightNow(.com).

If the benefits of cloud services are supposed to be scaleability and flexibility, here’s a contract which matches those benefits commercially as well as technically. Base infrastructure providers (think EC2 or S3) price by the drink. RightNow extend this to enterprise software, with pricing related to actual usage needs and with medium-term pricing commitments which a business can plan from.

It’s not quite by-the-drink pricing. If I read Frank’s review correctly (and I haven’t been back to the base document) then the contract is based on a total “pool” of usage over the year so that peaks and troughs are allowed to balance out. There’s a limit to how much idle capacity has to be provisioned to meet peak load, but it’s not an entirely on-demand service.

As Frank comments: “RightNow is moving price competition to long-term costs, where the real money is. We’ve already started to see it some on-premise vendors, such as Infor and Microsoft Dynamics, emphasizing their maintenance and support programs as a way of differentiating themselves from SAP and Oracle. Now we’re starting to see it in the cloud.” And he discusses the differentiation from established Cloud vendors like

The posting includes links, references and other discussion. It’s well worth a read, and not just if you’re considering Cloud enterprise software. It could provide some useful bargaining points with conventional providers too!

• A game-changing play in enterprise software, Enterprise System Spectator, 3 Mar 2010