At SAP’s annual Sapphire Conference in Orlando, Fla., an old acquaintance of the German software giant made a brash announcement on the show’s first day.
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Seth Ravin, president and CEO of Rimini Street, a provider of third-party maintenance for Oracle’s PeopleSoft, JD Edwards and Siebel applications, let it be known that Rimini Street will soon start offering the same types of services for SAP’s applications. Specifically, those services will be: maintenance and support for SAP’s aging R/3 application suite at a cost of 50 percent of what SAP charges, starting in early 2009.
“It’s the same business issue [as with Oracle’s customers],” Ravin says. “The customers like what they’re running, and it’s working for them. But they want to get to a price point [on maintenance] that works. They want to run their products for years longer. And they don’t want to get forced into an [SAP] NetWeaver upgrade that they don’t need at this time.”
What makes the announcement all the more intriguing is that SAP, through its TomorrowNow subsidiary, is also a provider of third-party maintenance and support for Oracle’s suite.
“SAP is always talking about the importance of customer choice,” Ravin says. “And we’re going to come right back and say, ‘OK, now it’s time for us to offer choice to the SAP customer base.'”
Ravin and SAP executives have some history together. Ravin and fellow PeopleSoft veteran Andrew Nelson cofounded TomorrowNow in 2002. In January 2005, Ravin and Nelson sold the company to SAP, which, in retrospect, was an uncharacteristic play for SAP. Nelson stuck around SAP; Ravin lasted three months under SAP’s umbrella and then founded Rimini Street in 2005. (To read an interview with the Ravin, see “The Man Behind ‘Half Off’ Third-Party Software Maintenance.”)
Since then, TomorrowNow’s (and SAP’s) world has been rocked. An embarrassing lawsuit filed by Oracle in March 2007 alleged that TomorrowNow employees had illegally accessed and taken information from Oracle’s customer support systems. (See “Oracle v. SAP Legal Fight Gets Messier, Raises Tough Questions About Third-Party Maintenance” for the latest on the legal battle.) Nelson resigned from TomorrowNow in November 2007, and SAP has (so far) been unsuccessful in trying to sell TomorrowNow. (According to SAP’s 2007 annual report, the TomorrowNow subsidiary had an operating loss of roughly $35 million in 2007.)
Ravin noted in an April interview with CIO that he was seeing a steady stream of former TomorrowNow customers coming to Rimini Street. As to whether he would buy TomorrowNow’s customer base from SAP, Ravin boasted “that there was no reason to pay for something that’s going to come to us for free.”
Why Not Go After SAP?
Rimini Street’s move into SAP’s backyard was a long time coming, Ravin says. The company has received many calls from SAP customers—some, Ravin says, who are dissatisfied with SAP’s maintenance and support program, and some who are just interested in other service options that can cut their costs. (See “Software Licensing and Pricing Is Still Too Complex and Costly” for more on software pricing.)
Ravin predicts that adding SAP’s products to its services will more than double its overall target customer base in 2009. “Everything we’ve seen leads us to believe that this will be a robust market and a much bigger market than the combined PeopleSoft, JD Edwards and Siebel market that we service today,” he says.
The timing of the announcement as well as the location (at SAP’s high-profile Sapphire event) is no coincidence. “At Sapphire, we’re going to be introducing SAP customers to an alternative,” Ravin says. “We’re going out there with the assumption that there’s a very thin understanding in the SAP world that an alternative exists, and we’re going to start from scratch, just as we have done with every product line.”
Rimini Street’s move to service SAP’s applications was bolstered when SAP quietly announced that as of Feb. 1, it was phasing out its Basic Support offering (which, at 17 percent, was a bargain for many companies) for all new customers. Instead, those new SAP customers now have to purchase its Enterprise Support plan, priced at 22 percent. (See “SAP Raises Software Maintenance Fees for New Customers” for more details on SAP’s fee increase and SAP’s reasons for making the switch.)
That was the “icing on the cake for us,” Ravin says. “We’ve been listening very carefully to make sure we’re designing a program that’s going to deliver the kind of value at half the price, and with SAP raising their maintenance fee rates, that just made it a lot easier for us.”
SAP’s first quarter earnings, released last week, were mixed: On one hand, it had a 22 percent decline in income from the previous year’s results and announced a slower rollout of its Business ByDesign product, which is an on-demand offering that targets small and midsize businesses. (For a look inside SAP’s SMB strategy, see “SAP Pays Partners, Goes with Gusto for SMB Customers.”) However, SAP’s revenue growth hit the double digits, and it continues to gain market share. In addition, on Friday, SAP announced a new partnership with RIM to deliver SAP’s business applications to BlackBerrys.
As to whether SAP would be surprised by Rimini Street’s announcement, Ravin doesn’t think it will shock SAP execs. “I’m sure they’ve been expecting it,” he says. As for Rimini Street, the timing is just right. “Really, at this point,” Ravin says, “the opportunity is just too good.”