Montana company targets feds with new cloud offering

Strategy relies on software-as-a-service model

What better place to establish a company whose primary products are clouds than in the Big Sky country?

At-a-glance

Company: RightNow Technologies Inc.
Headquarters: Bozeman, Mont.
Business: Cloud computing provider; software as a service.
Employees: 1,000
Public company: NASDAQ (RNOW)
Revenues: More than $150 million

Although its headquarters is more than 1,750 miles from the Washington, D.C., metro area, RightNow Technologies Inc., of Bozeman, Mont., is in the right place at the right time, company officials say, as it looks to ramp up the company's cloud computing offerings in the public sector.

“We don’t provide the infrastructure or the platforms, strictly just the software as a service,” said Kevin Paschuck, vice president of RightNow’s public-sector group in Herndon, Va. “We deliver it via the cloud platform.”

RightNow CEO Greg Gianforte founded the company 13 years ago after selling his security software business and moving to Bozeman, where he created software to help customers more easily get online information and assistance by avoiding a call center.

The company originally targeted private companies with more than $1 billion in revenue, including Black & Decker, 3M and Sprint Nextel. But about 10 years ago the company began to look eastward at the federal government market.

And five years ago, RightNow gave up its on-premise hosting and became a pure cloud provider.

The company has racked up 12 years of continuous growth in annual revenue, which now tops $150 million, Paschuck said.

Government revenue in any given year is 18 to 20 percent of that, he said, adding that those numbers are expected to grow as agencies increasingly adopt cloud computing models.

“We very rarely run into a government agency today that says, ‘We can’t go to the cloud,’” Paschuck said. “We’ve just kind of scratched the surface here on what’s going to happen over the next three to five years."

Thom Rubel, vice president at IDC Government Insight, agreed. He said IDC analysis conducted during the beginning of the year erred when it predicted the government would only dip its toe into cloud computing solutions in 2010.

“We were off on that prediction because it’s not dipping their toe," Rubel said. "Most government agencies are sort of waist-deep wading into the stream now, checking things out and getting engaged a lot more quickly than we would have anticipated."

To boost federal sales, RightNow named Pete Stoneberg deputy chief information officer of its government cloud unit and vice president of cloud delivery in June. His role is to provide day-to-day leadership for the RightNow CX Government Cloud solution for federal agencies, including the Defense Department.

Cloud computing “presents a new business opportunity, an understanding that we can take the knowledge housed inside government organizations and present that in a cloud-run service,” Susan Camarena, chief knowledge officer at the Transportation Department’s Federal Transit Administration, said at a recent cloud computing summit.

Two of the main drivers behind government cloud engagement are Federal CIO Vivek Kundra’s planned consolidation of federal data centers and his cloud initiative, Rubel said.

“On top of that, the cost issue is going to push [cloud adaptation] harder and harder because you are already seeing the president talk about agency budget cuts,” Rubel added. “Cost will drive cloud quicker than anything else.”

RightNow, which has clients in every Cabinet-level department, has performed about 170 implementations for federal agencies, all but a handful of them cloud conversions. Overall, the company has performed about 5,000 implementations worldwide.

The public company is working with a number of other agencies as they plan their budgets for possible cloud conversions during the next several years, Paschuck said.

“We count clients different than we do implementations,” he explained. “For example, we’ve got five implementations at [the General Services Administration]. We count those five implementations against the 5,000, but we count them only once as a client.”

But as the feds look increasingly at the cloud, competition also is increasing.

Affiliated Computer Services Inc., a Xerox company, recently launched a new cloud offering. And CA Technologies, formerly CA Inc., also unveiled a series of cloud computing products and services in May.

However, IDC’s Rubel said he believes RightNow can play on the same field with the larger integrators, as a prime contractor or subcontractor. “They can partner strategically,” he said. “And they know their strengths; they know their niche markets.”

Rubel’s only words of advice for RightNow: Remain aware of government’s overriding concern for security. “It’s higher just because it’s not optional,” he said.

RightNow’s three cloud offerings appear to address that concern because, in addition to a public cloud delivered commercially, two are designed solely for government clients.

One is for federal government customers with moderate security; the other is a highly secure cloud for DOD clients run in partnership with the Defense Information Systems Agency, which provides the infrastructure and runs the hardware and network.

In April, RightNow introduced its Safe Switch program, which Paschuck said meets stringent government security requirements and is designed to help federal agencies transition quickly and seamlessly to its secure government cloud.

The program is based on the cloud implementations RightNow has performed for government clients, including the Air Force Personnel Center and the Agriculture, Energy, Homeland Security and State departments.

It’s a hybrid cloud that conforms to the Defense Information Assurance Certification and Accreditation Process, known as DIACAP, Paschuck said.

Safe Switch comes with the costly and time-consuming certification and accreditation requirements for the hardware, software and infrastructure already built in, he added.

“We give them to the federal government as part of our offering,” Paschuck said. “So when someone signs up with us, we give them the complete package.”

That package includes the security assessment and infrastructure reports, the plan and action milestone documents, and certification and accreditation updates when a new software release becomes available.

Paschuck said the company bases its charges on a fixed price for the implementation and separate fixed price for the client’s metered usage, which is becoming the preferred revenue model of cloud vendors and clients.

User fees are based on economies of scale in conjunction with the GSA schedule. “We’ve got a price model that has five tiers,” he said. “The more people need and use [the cloud], the less their cost is.”

RightNow also provides flexible rates for agencies with usage that fluctuates, such as the Social Security Administration, whose peak usage occurs the first few months of the year. Upgrades are available quarterly, but it’s up to the agency to decide when it will install the new version, he said.

“Every quarter, we come out with our new certification and accreditation package, and we give it to the agency, our existing clients, that want to upgrade," he said. Clients will perform the upgrade when they are ready.

Contrary to its name, Paschuck said RightNow does not tell clients, “Hey, here’s the date you’re going [to implement it] no matter if you’re ready or not.”

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