Rimini Street fired the latest salvo in the ongoing war over software maintenance this week, announcing that it has expanded the number of SAP applications it supports.
The third-party maintenance provider, which also supports Oracle applications, said it will now back a range of SAP Business Suite modules, including SCM, CRM, EWM, PLM and GTS. Rimini Street had already supported SAP R/3 4.x, ECC 5.0, ECC 6.0 and other products.
Companies like Rimini Street are part of a small but growing group of firms catering to customers who have stable legacy systems and no immediate desire to upgrade — which is only possible with vendor-provided support — and therefore find little value in paying for a full-price maintenance contract.
But companies like SAP and Oracle highly prize their maintenance revenue streams, because they provide extremely high profit margins and steady income despite slowing sales for new software licenses
Rimini Street says its service provides customers with named and local support workers; 24-7 coverage with responses guaranteed in 30 minutes or less; tax and regulatory updates for more than 100 countries; bug fixes for “serious issues”; and support for customizations at no additional charge.
Customers will also save at least 50 percent on their current vendor maintenance bill, and Rimini Street is pledging to support existing application releases “through 2020 and beyond.”
That one-two punch of cost savings and convenience has resulted in rapid growth for Rimini Street, according to a steady stream of announcements from the privately held Las Vegas company, although it remains tiny in comparison to giants like SAP and Oracle.
The high stakes around maintenance revenue have been highlighted by the lawsuit Oracle filed in March 2007 against SAP and its now-shuttered subsidiary TomorrowNow, which provided lower-cost support for Oracle’s PeopleSoft, JD Edwards and Siebel applications.
Oracle claims SAP and TomorrowNow managed to provide discounted support through illegal acts, such as making thousands of unauthorized copies of Oracle’s software, and conducting “routine, massive and indiscriminate downloading” of support-related materials on behalf of customers who weren’t entitled to them, according to court filings.
Rimini Street was founded by former TomorrowNow executive Seth Ravin, who left the company after SAP purchased it in 2005.
Oracle recently demanded that Rimini Street reveal the details of its business model, according to court filings tied to the SAP case.
But Rimini Street is resisting on grounds the information is irrelevant and that Oracle is embarking on a “fishing expedition,” possibly in preparation for a copyright infringement claim against Rimini Street, according to another filing. Oracle would have no basis for such a claim, according to Rimini Street.
Meanwhile, Rimini Street is hoping to exploit anger over SAP’s decision last year to migrate customers to a fuller-featured but more expensive Enterprise Support service. SAP recently responded to criticisms by agreeing to work with user groups on a set of KPIs (key performance indicators) meant to show the service’s value.
SAP spokesman Andy Kendzie offered a measured reaction to Rimini Street’s announcement.
“We know the economy’s been challenging companies to make tough choices, but the overwhelming majority of our customers see the value provided by manufacturer-driven support, such as that SAP offers,” Kendzie said.
SAP could conceivably retain customers who are eyeing third-party maintenance providers by restoring a lower-cost maintenance plan. There are no internal discussions ongoing about such an option, according to Kendzie.
Rimini Street spokesman Dave Rowe declined to specify how many SAP customers the company is serving, saying only that the total is in “multiples of 10.”
But SAP-related inquiries now amount to 40 percent of Rimini Street’s inbound sales leads, he said. “The demand has been unbelievable.”
It’s difficult to know for sure exactly how widely SAP users will adopt third-party support, “but in general, competition over maintenance is healthy,” said Ray Wang, a partner with the analyst firm Altimeter Group. “If these [options] get embraced, it’s a wake-up call to SAP in terms of how important that business is to them.”
The timing of Rimini Street’s announcement is probably deliberate, according to Wang. Many SAP maintenance contracts get renewed at the end of each calendar year, and therefore Rimini Street wants to remind customers they are waiting in the wings, he said.
One of Rimini’s initial SAP customers is Graham Packaging, a York, Pennsylvania, company that had about US$2.6 billion in net sales in 2008. Graham recently signed a 10-year support pact with Rimini Street for its ECC 5.0 SAP implementation, said Jeff Rishel, vice president of information technology .
The company has been an SAP user for 11 years, according to Rishel. “SAP is a great application. It’s done very well for us and been very stable,” he said. “We’ve added new locations to it over time but for the most part, the configuration is almost identical now to when we started out.”
For five or six years, Rishel has been pressing SAP to lower its maintenance costs, he said. “We’ve been saying to them, ‘we’re paying a lot of money every year and really don’t get anything for it.'”
SAP’s decision on Enterprise Support only heightened Rishel’s discontent. “I had been fighting with SAP … saying you’ve got to lower my costs. What it said to me is, ‘they’re really not hearing my concerns.'”
Graham began looking for third-party alternatives, settling on Rimini Street after hearing good things from customers who were receiving support for other ERP systems, such as Oracle, he said.
“I personally pushed the envelope with Rimini,” he added. “I wanted to actually visit and talk to the people who were going to support us. I talked to their team and found them to be experienced people that my team felt very comfortable with.”
So far, Graham is satisfied with Rimini’s service, according to Rishel. It took just a couple of weeks for the company to resolve a problem with a system inside SAP involved with tracking Graham’s capital equipment, he said.
The break with SAP was clean, according to Rishel. When he notified SAP that Graham did not plan to renew its maintenance agreement, the vendor made no attempt to retain the company’s business, he said.
Rishel is “not really” concerned about any potential legal issues related to third-party maintenance, saying Graham conducted careful “due diligence” before signing the Rimini deal.
“What I’ve seen and heard is that more people are talking about getting into [the third-party maintenance business] … It’s a risk we’re willing to take at this point,” he said.