SAP third-party support saves money but may stifle innovation

SAP third-party support lets customer follow their own timetable

Paying another provider for support means customers can move to S/4HANA on their timetable, rather than being forced into SAP's migration schedule, according to Seth Ravin, CEO of Rimini Street, based in Las Vegas.

Seth Ravin

"We provide a business-driven roadmap, which allows you to do the things that are appropriate for your business," Ravin said. "Just like no one forces you to trade in your car until you're ready to trade it in -- some people do it in three years, some do it in five, some drive it until the wheels fall off."

Moving support to Rimini Street allows customers to fund innovation projects that they otherwise don't have the budgets for, Ravin claimed.

"We've become a funding source in many ways, by helping customers better reallocate spending that normally would go to an SAP or Oracle where they're generating 90-plus-percent profit margins on maintenance," he said. "We're helping them keep that money and redeploy back into their organization rather than sending it to the vendors."

Does third-party support hinder innovation?

Christopher Carter

SAP customers using companies like Rimini Street for third-party support hinders innovation, according to Christopher Carter, CEO of Approyo, an SAP partner based in Brookfield, Wis., that specializes in S/4HANA migrations.

Third-party support providers like Rimini Street stifle innovation because they delay companies from a migration to S/4HANA that Carter deems necessary for companies to keep pace with the latest technology advancements. Companies may save in the short run by getting less costly support and maintenance, but they will remain stuck on a version that's far out of date.

"They're taking away from a customer the ability to go to that next step," Carter said. "They're pitching them 10 cents on the dollar, but at the end of the day, when they come back in five years, they're going to be so far behind, it's going to stifle their organization."

The differences between SAP ECC and S/4HANA are like night and day, according to Carter, and companies should not base their decision to migrate on a lower maintenance bill.

"It's not about the maintenance fee; it's really about innovation," he said. "If all they're worried about is the 20% maintenance fee, then they're looking at it the wrong way."

But Ravin countered that the idea that SAP third-party support is hindering innovation is "absolutely wrong." Innovations in companies are not taking place in the back-office ERP systems, and the idea that massive investment in these systems will generate competitive advantage and growth is a fantasy promoted by the top ERP vendors and the system integrators who work on the projects.

"These are the differences between these systems of record and systems of engagement, which is the front end where you really conduct your business and where you connect with your customers," he said. "Competitive advantage is created in that world and we are funding it, because most companies are not getting extended funds from their boards."

SAP third-party support not either-or

Using a third-party support provider like Rimini Street is not necessarily a one-or-the-other situation, according to analyst Vinnie Mirchandani, co-founder of Deal Architect.

Several SAP customers have moved to Rimini Street to support legacy systems but continue to buy newer SAP products, such as S/4HANA and C/4HANA, Mirchandani said. Others are migrating to S/4HANA knowing that it may take several years, so they have moved ECC support to Rimini Street.

"Rimini Street and SAP talk about each other as competitors, but I have always seen them as positioned a bit differently," he said. "For example, Rimini Street supports customizations, but SAP does not as part of its maintenance. I have long advised customers to not look at them as either-or."

Analyst Josh Greenbaum, co-founder and principal of Enterprise Applications Consulting, an ERP consulting firm based in Berkeley, Calif., also believes that third-party support is situational and depends on the customers' needs and requirements.

"I know of a company that moved to Rimini Street because they know they're doing S/4HANA in X number of years, but in the meantime, they don't want to pay that huge number [for SAP support]," Greenbaum said. "They've got a plan and they don't need SAP-level maintenance. There are a lot of different strategies for why you would go with a Rimini Street."

Greenbaum agrees that the back-office systems may not be the place for innovation.

"There may be a scenario where you try to save money on ERP so you can spend money on Hybris to build an e-commerce front end," he said, "which may be more strategic than having the latest and greatest back-end. But the answer is 'yes' to all possibilities, and I don't think it's black or white at all."

Rimini Street offers application management services

In addition to SAP third-party support services, Rimini Street is now offering application management services (AMS) for SAP environments. The AMS will be available for third-party support services customers who want Rimini Street to run their systems as well, Ravin said.

"Our customers are saying, 'We want you to come in and run our systems,'" Ravin said. "AMS systems have been a race to the bottom with fees, and this means the [AMS system integrators] are using very unskilled people -- they don't have the diagnostic experience and they don't have experience running the systems, so they make errors."

The new AMS is targeting a fairly small market now, but it could grow into a valuable option for SAP customers, according to Mirchandani.

"Rimini AMS is more targeted at offshore and other AMS firms, and that market has been ripe for disruption with automation and multi-tenancy," Mirchandani said. "Rimini is tiny in that market today but could grow nicely."