A growing number of ERP (enterprise resource planning) software customers are considering a jump to third-party software support providers, according to new data from analyst firm Constellation Research.
Some 57 percent of 244 respondents to a survey conducted in the second quarter indicated interest in third-party support, compared to 42 percent in a study conducted last year and less than 20 percent in one completed in 2009, said Constellation Research CEO Ray Wang during a webcast sponsored and hosted by Rimini Street, which offers support for Oracle and SAP applications.
More than 90 percent of respondents interested in making the switch cited cost pressures as a reason. Another 80 percent expressed dissatisfaction with the value they are getting from vendor-provided support.
Vendors such as SAP and Oracle derive a great deal of their revenue and profits from maintenance fees, which customers pay yearly in exchange for technical support and product upgrades. Companies such as Rimini Street can’t provide the latter service, but claim that customers will get more effective, hands-on help, as well as the regulatory updates, customization fixes and tweaks they need to keep systems running.
On average, ERP implementations done by Global 2000 companies are 11 or 12 years old now, and feeling a little creaky, Wang said. “Most of these systems were installed pre-Y2K. We were in a rush, and today we’re suffering,” he said. Moreover, many companies got a great deal at the time on software licenses, which have now turned into expensive shelfware, he added.
Toss in increasing demands from users for consumer-like experiences and tools, and enterprises are feeling serious pressure to do something with their SAP and Oracle backbones, according to Wang. Money saved by moving to a third party support provider could free up cash to install SaaS (software as a service) products that add new functionality to the core system.
Rimini Street can fit in well with customers who go that route, said president and chief operating officer Sebastian Grady during the webcast. “We believe that the core supply chain and manufacturing [modules] will always be with the SAPs and the Oracles.”
Users who decide to go with third-party support should be sure to download all available modules they haven’t installed, as well as related documentation, since they won’t be available after the switch is made, Wang cautioned.
It’s their right to do so, he said. “You’ve purchased that through your maintenance dollars.”
Customers who fear going off vendor support means they won’t be able to return someday shouldn’t worry, according to Wang.
“I’ve done 1,100 software contract talks, and I’ve never had a vendor say, ‘Hey, we don’t want your business anymore,” Wang said.
But one thing vendors such as Oracle definitely don’t like is the prospect of losing serious market share to companies like Rimini Street.
Oracle famously sued SAP in 2007, saying its now-shuttered subsidiary TomorrowNow, which offered Oracle application support, had made a large number of illegal downloads from Oracle’s support site.
SAP ultimately admitted liability for TomorrowNow’s actions and a jury awarded it US$1.3 billion last year. SAP is hoping to get that judgment reduced significantly, and has not ruled out an appeal of the case.
In 2009, Oracle also sued Rimini Street, which is led by TomorrowNow co-founder Seth Ravin, saying it had essentially duplicated TomorrowNow’s business model. Rimini Street has denied any wrongdoing and countersued Oracle, charging it with anticompetitive practices.
While Ravin previously told IDG News Service that due to the lawsuit “probably a dozen deals went sideways,” the privately held company has reported steady growth and is reportedly eyeing an eventual IPO (initial public offering).
Observers believe the Oracle case’s outcome could set some clear ground rules for the overall third-party maintenance market, which remains quite small. Other players besides Rimini Street include Cedar Crestone and netCustomer.
Rimini Street did not address the litigation during the Webcast Tuesday. A spokesman did not immediately respond to a request for comment.