Slightly more than a year ago, Rimini Street CEO Seth Ravin announced at SAP’s 2008 Sapphire show that his upstart company would offer third-party maintenance and support services for SAP’s aging suite of R/3 applications, beginning in 2009.
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The new SAP support would round out the third-party maintenance services Rimini Street has offered since 2005 for Oracle’s ERP and CRM apps: PeopleSoft, JD Edwards and Siebel. “SAP is always talking about the importance of customer choice,” Ravin told CIO.com in 2008. “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.'”
Now a year later, Rimini Street announced (at Sapphire 2009, being held this week) that its support business for SAP’s R/3 4.x, ECC 5.0, ECC 6.0 and BW 3.5 products is now open for business.
Ravin’s timing couldn’t have been any better: Maintenance and support fees are the IT gripe of the moment as SAP and Oracle customers face intense financial pressure to manage IT expenditures like never before.
SAP recently announced that it was modifying the pricing program for SAP Enterprise Support, in effect delaying the ERP giant’s much-talked-about maintenance price increases. And Oracle followed suit just days later.
For Ravin and Rimini Street, the economic downturn and maintenance turmoil at SAP and Oracle have been good news. For instance, Ravin says canceled SAP projects have freed up more SAP-specific talent for his company to recruit. And since the SAP announcement last year, Ravin says he’s been “beating customers back with a stick.” As such, business has been good: Rimini Street’s 2008 financial results show that the company quadrupled its 2007 figures.
In an interview from Sapphire, Ravin talked with Senior Editor Thomas Wailgum about what’s still holding potential customers back from signing on with Rimini, how his former colleagues at SAP (he was a VP there at one time) treat him at the Sapphire conference, and how he was able to sneak into SAP’s own backyard in Germany and talk to CIOs there about choosing Rimini Street.
CIO: How’s everything been since the SAP announcement?
Seth Ravin: It’s an interesting show. SAP is doing a lot of dancing down here [about maintenance]. We hear it from Oracle, too. You can only imagine the amount of requests they get on a day-to-day basis for discounts. But they’ve got to hold those lines, otherwise they won’t be able to deliver those [quarterly financial] numbers. It’s pretty tough for them.
[SAP President of Global Field Operations] Bill McDermott was on [CNBC] last week. McDermott said, in effect, that analysts have got to stop focusing in on the new license revenue because that’s just an old measure. It’s time to focus in on the important thing: Their strong maintenance renewal business.
My translation is that SAP doesn’t plan to sell a lot of software going forward. And that’s a whole shift of focus, and it really sort of describes what [SAP] is facing in general: Customers have more software already than they know what to do with—they’re “oversoftwared”—and they’re not looking to buy a lot of new stuff. And that’s a real problem if you’re in the software business.
CIO: Why do CIOs and potential customers say no to you? What’s their rationale?
Ravin: First of all, it’s a little bit unnatural to come along after you’ve had all these analysts say for years: “The best thing to do is get so close to your vendor, so you know what they’re doing, and you have relationship with them. That’s how you build the value in the relationship.”
Here we come along, and in some cases we say: The best thing you can do is separate from your vendor. It’s an unnatural, non-intuitive type of event, process and strategy, and it takes some people—in some cases—multiple years [to get comfortable with].
When we originally started years ago, people said, “What? A competitor? It’s not just about negotiating about how much I have to pay for maintenance? I actually have a choice?” We had to go through a long learning process. Yet when we made the SAP announcement [in 2008] that we intended to launch the service next year, we were sitting there with a hundred companies—and we’re talking about SAP’s largest customers—already at our door five minutes after they heard about it looking for a proposal or a contract, and wanting to move forward.
CIO: Who’s the ultimate decision-maker on signing on with Rimini Street—CIO, CFO or CEO?
Ravin: The decision process is almost exclusively done by the CIO and CFO together. But the CFO is often pushing it because they’re focused on dollar savings. So they’re looking at the financial aspect—and, sure, risk is a key part of that equation. But they’re looking at the risk-reward from the financial perspective. And the CIO is the one who’s going to chime in on whether it will work from them, and will be able to run the business, and run the software they way they want to. So each of them plays a part.
But I would say, more often than not, it’s the CFO who actually pushes our service through the door and signs for it.
CIO: What about what happened in Germany last month?
Ravin: It was pretty wild. I’ve been saying this for years: The last place that we expected to be was in Germany, because nobody takes on SAP on their home turf. Not Oracle. PeopleSoft didn’t. It just wasn’t something you did.
And here we were invited in by 30 CIOs who wanted to see an alternative to SAP maintenance. SAP was beside themselves over the whole incident. They clearly were perturbed. This is a good reason why we launched our website in German yesterday. We could have a potentially large footprint in Germany.
CIO: Do you have the talent and manpower to handle all this new business while taking care of the existing customer base?
Ravin: We’ve gotten hundreds of resumes, many of them from SAP employees who are looking to do something different, who are excited by the service. We’ve heard such things as: “SAP is not the same company that it was years ago, when it was customer-centric.” That is the type of things that are driving a lot of folks to our door.
If you asked us years ago if we were concerned that there was not enough SAP talent out there, we would have said yes. Clearly we have benefited from so many projects cancelled due to the economic situation, and that’s allowed us to pick up a huge amount of additional talent that might have been harder to acquire a year or two ago.
CIO: SAP is positioning Business Suite 7 as a product that will take care of upgrades and many of the hassles that are at the heart of Rimini Street’s low-cost services. Are you concerned about Business Suite 7?
Ravin: Not at all. SAP has such a complex product line and road map that they’ve lost track and they’re confused themselves. It’s a nice vision of doing partial upgrades. But the problem is, if you really want to drive value, your parts have to connect together.
The whole strategy of moving one piece forward and not others sounds great from a whitepaper perspective, but if you saw what happened recently, SAP was having a hard time articulating to customers, who actually wanted to move forward on this path, what is that path? Do you have to apply all the different updates or separately? Are there dependencies from one to another? Pre-requisites? Co-requisites?
And don’t forget, there are a huge number of SAP customers on older releases, and in order to even more forward to take advantage of a Business Suite 7, they will have to spend a huge amount of money to upgrade from their current releases just to get there before they can even take advantage of a future strategy. So you’re talking about having to still write a check for a huge amount of money—new hardware, infrastructure, retraining of personnel—just to get to the point where you could actually take advantage of that.
CIO: Do your customers ever talk about “life after Rimini Street” and what will happen in a decade with their ERP systems?
Ravin: There is a group of companies so focused on current issues and bottom line that, for them, talking 10 years to 15 years from now is an eternity. They’re trying to survive the next couple of years.
Some customers say, we’ll look at a new product 10 years or 15 years down the line, and see what’s available. And then with all the money we saved over the decade, we’ll go on a capital shopping spree, and we’ll pick our next system based on an actual vendor analysis—not because we paid for the upgrade 10 times over—but because we’re going to pick the system that works best for us with the latest technology a decade from now.
The other important part of this is, [Rimini Street] is in a transitory service no matter what. We’re trying to get customers to our model’s vision: Basically once a decade or every 15 years, you’re going to replace these back-end systems with a whole new system.
But the model that’s been sold by the current software companies is: You install it and then you do these major upgrades every two to three years. And by the time you’ve finished getting one upgrade done you have to start planning for the next. It’s a perpetual process.
CIO: You’re selling a service that is directly opposed to SAP’s maintenance-business model. Does that get confrontational at events like Sapphire?
Ravin: You mean, am I wearing a bullet-proof vest?
CIO: Yeah. Are there any awkward stare downs in the hallways as you’re walking around?
Ravin: I was a VP at SAP for a short time, so I know these guys. I have a lot of respect for this management team.
You’ve seen where they said that they believe in competition in the market. We’re a little competition [for them], and they may lose some points with some customers. But think about it: Those customers might have been lost to other software products. They’re still running SAP products. They’re just choosing a different vendor to get their support from.
At the end of the day, if everything works as the market should, SAP is going to have to work a lot harder building a better [support] program that’s going to be more compelling to customers, and so are we. So the customer should win.
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