Third Party Support: Let's talk about the first guy

INDIA: It was a hard-to-resist question to ask when one gets a quick minute to chat with the head honcho of SAP India. He answered with all the confidence expected of a reigning champion — “It’s not on my concern list.” Said Peter Gartenberg, MD, SAP Indian Subcontinent.

“What should be a real concern is how to bring value to businesses. That applies to CIOs too. If they keep looking at support costs, they are missing their main mission.” He explained.

He said his focus was on how to help customers bring down TCO and deliver business value for every penny invested.

As unperturbed as this aplomb may sound, there is a Capraesque wave splashing the shores of many ERP towers.

There are many Becksemmer spots that prove that support costs as a pet peeve are now being exploited by the third-party support breed. As they say, no one kicks a dead dog.

The slew of criticisms and at times strong litigations, happen to show that the duel between third-party support providers and incumbents won’t be an insignificant one.

The question is — how big a worry crease can these so-called noobs leave for the seasoned experts?

Specially, when maintenance and support happen to be a recurring annual revenue spinner for ERP suites. Revenues of the big boys, depend heavily on support fees. They also pump up their profit margins by as much as 90 per cent in many cases. License costs dwarfs in comparison when a customer is shown the AMC bills.

With SaaS ERP apps increasingly gaining a foothold in the market, fixed license costs are coming under a serious scanner for customers who can now avail incremental benefits and quick features.

That explains the ongoing tiff between SAP and Oracle over a support subsidiary TomorrowNow, which the former acquired. TomorrowNow, provided discounted support for Oracle applications. In the lawsuit Oracle alleged that TomorrowNow overstepped its bounds, illegally downloading support materials and software in excess of customers' rights. No matter who ends up coughing up billions, this suit brings out the issue of third-party support as much as the overriding war over IP.

What is interestingly mentioned in another media report, makes the gravy train more fun.  In 2006, Oracle announced a partnership with Systime for supporting SAP's R/3 ERP suite, and still existing. This was the earlier avatar for what we now know as Business Suite 7.

Rimini Street is now on the radar.

Oracle has subpoenaed about 25 of the Las Vegas company's customers, a court filing made late last year in U.S. District Court for the District of Nevada shows.

Oracle is seeking answers to many questions with this legal step: like how Rimini provides software and support materials to that customer, whether Rimini uses unauthorized crawlers or scrapers to obtain Oracle software for that customer, or whether the customer provided Rimini with Oracle source code or installation media, as per Oracle’s filing that also added "sunshine act" requests with "44 public entities that may have had significant contact with Rimini.

But Rimini Street, as per a media report, is another unperturbed face going by the looks.

It retained more than 95 percent of its clients, and customer satisfaction rates were 99 percent, according a company the announcement. and it also reports having more than 400 customers as well unaltered plans to offer previously announced new services, including support for Oracle's E-Business Suite. It has also got a spotlight when it pledges that customers will save at least 50 per cent on their support bills.

Maintenance revenue is huge, estimated at around 14 to 15 per cent for Oracle, while almost about half of total sales of 2010 for SAP.

And this is  exactly the spot where Rimini has offered third-party maintenance for software applications like Oracle's PeopleSoft, Siebel and JD Edwards, and has recently, started its offensive on SAP applications with its areas of interest being payroll and accounting etc.

Fate has its twists and quirks, specially in IT business folklore.

Seth Ravin, who has founded Rimini Street had also founded TomorrowNow, that was picked by SAP in 2005.

The ERP market is changing, for everyone, and specially for the big enchilada.

A glance at the market portions scooped out by various vendors in the enterprise software market (for 2010) will tell a lot. SAP had an 18.8 per cent share, with Oracle at 11.0 per cent. Following them were new names like Infor/Lawson with a 3.9 per cent share and Epicor/Activant with a 1.6 per cent. Sage cornered 4.4 per cent.

Noted analyst Ray Wang mentioned this in his April blog post titled “The Next Great Top 10 ERP Vendor Lineup" that the Epicor/Activant and Lawson moves, along with the questions raised by Constellation could at some point even "upend" the global software marketplace. His research at the time found that companies like Sage, Infor / Lawson and Microsoft were tied at four percent each, rounding out the top 5 ERP vendors by market share.

But many feel that there’s not much that will change. Bernard Golden, CEO of CEO of HyperStratus, author of Virtualization for Dummies says, “I don’t think about 3rd party businesses making that imp an impact. Essentially, it’s the same direction like outsourcing agreements. The question which people will ask — Will people keep doing the same thing or will they keep buying Oracle, SAP etc?”

He agrees that ERP suites of now are extremely expensive, but he also thinks that the larger trend will be around SaaS. Customisation need and VFM will be better addressed there.

It will take a while before a meeting with Gartenberg takes place, and it would be quite a thrill to see what changes in that tete-a-tete. The question? Or his answer?

Let’s see.