March 13, 2006 11:33 AM PST
Potential Sun Grid customer: No thanks
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RightNow runs its own customer relationship management (CRM) software on its own computers at three company data centers. Customers pay to use the resource, making RightNow a prime example of the software-as-a-service business that Sun executives describe as "ground zero" for their Sun Grid project.
In a meeting here with reporters on Friday, Gianforte said reliability and cost issues mean the company isn't interested in managed hosting services, including the $1-per-processor-per-hour Sun Grid.
He tried turning over his servers to a managed hosting company seven years ago, he said, and the move was a "miserable failure" that has since been reversed. Managed hosting companies want control over computers, but RightNow needs to be the boss in order to keep its equipment running around the clock. "We need control to get that kind of reliability," Gianforte said. Nothing has changed in the last seven years to change his mind, he added.
It doesn't make financial sense, either, Gianforte said. Running his own data center, including engineers and other staff, costs 6 percent of revenue, and he expects that to drop to 4 percent in the next two to three years. One of his top competitors, SAP, pays IBM much more than that to host its software-as-a-service offering, he said.
Gianforte's reluctance spotlights the behavioral obstacles that lie in Sun's path. But despite their differences of opinion, Bozeman, Mont.-based RightNow and Sun are in the same boat: Both want to convince customers that it's better to pay for an outside service than to run in-house computing equipment.
Gianforte argues that customers are better off financially if they use RightNow's service instead of running their own internal information technology infrastructure. Sun makes the exact same argument, but one level down. It could be called a hardware-as-a-service strategy.
The launch of Sun Grid has dragged on for more than a year as the Santa Clara, Calif.-based company wrestled with issues such as security, billing and compartmentalization of different clients' jobs. Though the company is working on a "retail" version that anyone can pay to use, Sun ultimately hopes to be just a "wholesaler" for large customers that build their own services on top of Sun's infrastructure.
Sun President Jonathan Schwartz believes RightNow will come around eventually, drawing upon the electrical utility metaphor so popular among server companies today.
"When George Westinghouse suggested to a potential electrical utility customer that he could run a grid better than they, the chief electricity officers back then said, 'We need control (of our dynamos or generators) to get that kind of reliability,'" Schwartz said in an e-mail to CNET News.com. "Which is to say, we face the same cultural reticence as Greg faces when talking to a CIO. I'm sure he hears all the time from his customers that there's no way anyone else can run CRM more reliably than internal IT."
IBM and SAP didn't immediately return requests for comment.