Dialing Down Software Support
Somebody, Anybody Other Than the Vendor
When the vendors either won't budge on price or simply cannot provide the level of service that you require, there are third-party providers to consider -- but the vendors will fight tooth and nail to keep you from going to one.
That's what happened when Randy Gaston, CIO of Santa Fe Natural Tobacco, called her Oracle rep to explain that the company was considering going with a third-party support provider for PeopleSoft 8.8 instead of renewing with Oracle.
"Our maintenance costs were incredibly high," Gaston explained. "We were not getting a return on the dollar for maintenance fees."
But Oracle did not surrender pleasantly. "It was immediately about telling me how stupid I was. It was all about what's around the corner for Oracle, rather than a negotiation," she added. "This was like me asking somebody what time it is and them saying 'we don't use the sundial anymore.'"
So Gaston turned to a third-party provider of support for Oracle applications. After evaluating both Rimini Street and rival TomorrowNow, she ultimately elected Rimini Street because it was willing to engage in a unique relationship with Santa Fe Natural Tobacco that calls for what Gaston referred to as aggregate staff, or support folks dedicated to her so that Gaston would not have to carry an extra 2.5 full-time IT professionals.
Rimini Street and TomorrowNow provide performance, operational, and configuration support, as well as patches, bug fixes, legal, tax, and regulatory updates, among others. "The standard pricing approach for both Rimini Street and TomorrowNow is to take whatever the customer is paying to Oracle [or SAP] and halve it," explained Pat Phelan, a research director at Gartner. "In Rimini Street's case, they have taken an even deeper discount for certain situations. I suspect it was for deals where Oracle had been substantially overcharging for old, very stable modules."
Gaston's experience echoes that assessment. "We now get support comparable to what we were getting from Oracle, but it's 50 percent of what I was paying Oracle. I get a whole, whole, whole lot more. Not only because of the support, but also the aggregate staff arrangement."
Rimini Street in May pre-announced that it will support SAP starting in January, becoming the first third party to actively pursue R/3 customers, according to Gartner. Since spreading the word, "we've had tons of calls from top SAP customers. Some of them, SAP's hair would stand on end if they knew these guys were talking to us. We're talking top five to ten companies here. They stand to save billions of dollars," says Rimini CEO Seth Ravin.
SAP downplayed the significance. "Customers are telling us more and more that they want us to support them, and not just SAP software but everything that connects to it. And they're willing to pay for it," says Bill Wohl, vice president of global communications at SAP.
That may be true for some customers, but third-party support has another key advantage: A way to escape the high-pressure upsell to the latest version. Ravin says that the other half of its customer base uses Rimini Street to extend the life of older applications; many want to keep their software for 5 or even 10 years without upgrading. "Customers are taking control of their destiny." Often, "the software can run even after the vendor doesn't want anybody on it."
Gartner's Phelan explains that "old releases of products are very stable and require little actual on-the-ground support; and the companies are not receiving much in the way of support from the vendors anymore on the old releases anyway, so the risk of going to a third party can be less than it looks at first glance."
The city of Flint, Mich,, for instance, uses a PeopleSoft payroll app from 1997. Had they been on Oracle's upgrade path, they'd have spent millions by now to get new apps they didn't really need, says Ravin. He used to think the practical life of an application was 10 years. "With Flint, we're going to go another 5."