No one tells you when it’s time to trade in your car. You drive it until you find one you like better or it's time for a change.
That’s how Rimini Street CEO Seth Ravin feels about software vendors’ maintenance and support. Just about a year ago, Rimini Street rolled out its SAP third-party support option. Since then, Ravin said, it has signed on a “couple of dozen customers” – exceeding its first-year target of 12. Rimini Street provides third-party support – application support plus necessary tax, legal and regulatory updates – for 320 of Oracle's PeopleSoft, Siebel and JD Edwards customers and SAP customers. Ravin promises to cut his clients maintenance and support charges in half with his services and to provide total cost of ownership savings of between 70% and 90% over a decade of using them.
SearchSAP.com caught up with Ravin for an update on the service, why it’s appealing to ECC 6.0 customers, and, of course, what it’s like to sue, and be sued by, Oracle.
SearchSAP.com: You’ve said that “the majority” of your clients are on ECC 6.0 – the latest version of SAP’s flagship ERP software. That’s a bit surprising, isn’t it?
Ravin: Early on, there was a question from folks like Gartner who thought that really the majority of customers would come from the 4.6 to 4.7 range. The reality is that the majority of our customers and the majority of our pipeline are ECC 6 customers.
What you have are two groups of folks: You have those that are running on the R/3 releases who do not want to spend a huge amount of money to get to the ECC 6 platform; and those who really have already spent the money to get to ECC 6, and they’re probably on one of the Enhancement Packs and really don’t see the value of the future enhancement packs.
SearchSAP.com: There are also folks concerned that third-party support isn’t a long-term solution, only an interim option until the organization is ready for another major software buy. What would you say to them?
Ravin: To most people’s surprise, our average contract length is 10 years. We have some going as many as 14 or 15 years. This gives you a good indication that customers are thinking in the long term. They just want [their systems] to work and to be in compliance. Our customers can cancel their contracts at any time, for any reason -- and for no reason.
We’re supporting customers that are on 13- to 15-year-old releases that we expect to support for another five years. When we launched the business, we expected to help customers get another 10 years out of each release; and in reality, we’re now looking at 15 to 20 years potentially. They are such stable releases, and because they’re producing core transactions, there’s just not a lot of change that people need other than the tax, legal and regulatory updates. The reality is, payroll’s still payroll. General ledger’s still general ledger.
SearchSAP.com: Rimini Street isn’t facing a whole lot of other competition -- there aren’t many other third-party support shops. Why is that?
Ravin: The big software companies have lived very well off the old model and fight very hard to keep it in place. Those people who have to blaze the trail, to open up those markets, that’s really where we sit. This is a very [fiercely competitive] business. We have to be willing to take on the largest software providers in the world and challenge their model. Most of the people who would be in a position to do that – the large SIs – are the same people who depend on the software companies for implementation revenue and other things under their partnership programs. Today, most of them want to stay with the software vendors. But we think that will change, most likely around 2013.
SearchSAP.com: Why is 2013 the year for third-party support providers?
Ravin: We plan to prevail in our litigation with Oracle in 2012, which I think will change once again the market position for everybody. I think it will allow several other players to feel comfortable entering the market. It’s too big – it’s a $16 billion market. There will be other players that will step up when they see that the ground has settled a little bit.
SearchSAP.com: So Oracle and litigation surrounding third-party support (i.e., TomorrowNow) has really dampened the enthusiasm for getting into this market. What about customers, who, with this knowledge, may be hesitant to step into this market as well?
Ravin: Look at our aggressive countersuit against Oracle. This is a very different position. TomorrowNow was shut down because SAP didn’t feel like fighting a battle. It had other issues to fight, really facing its mid-life crisis as a company. For them, [TomorrowNow] was a small battle off to the side that was a distraction from something much bigger. Don’t confuse that with anyone’s belief about the market.
We intend to stop Oracle’s five-year campaign of anti-competitive behavior, and we’re going to bring a sense of [greater] freedom to this market. There isn’t a customer out there that doesn’t feel that sort of lock-in pressure that [comes] from the vendors today.
Sure, there were a few customers in Q 1 and there were a few customers in Q2 who might have shied away or put their plans to move to us on hold because they were trying to better understand Oracle’s litigation. We are actually suing Oracle to recover the damage from those situations.