The downturn has opened up opportunities
for IT departments to cut the support costs of their enterprise
resource planning (ERP) software.
Start-ups such as Rimini Street and Spinnaker claim
to provide third-party technical support to users of big-ticket
enterprise software at a much lower cost.
Rimini supports JD Edwards, Siebel and Peoplesoft
business software, which are owned and supported by Oracle, and has
recently introduced support for SAP software. Spinnaker provides
third-party support for JD Edwards.
The trend could pose a long-term threat to
companies such as Oracle and SAP, which generate more than half of
their revenue from support services.
Ronan Miles, chairman of the
UK Oracle User Group
(UKOUG), welcomes the extra competition. "Anything that liberates a
market and encourages best practice as a competitive edge is good,"
he says. "The third parties may pressure Oracle to bring back a
maintenance-only option or put pressure on the Oracle value-added
services," he says.
Big savings
David Rowe, senior vice-president, global marketing
and alliances for Rimini Street, claims businesses that move to a
third party for software support stand to save up to 90% of
previous costs from by paying lower annual fees and eliminating
non-essential modules, support processes and updates.
By breaking away from enterprise software
suppliers, companies can also avoid forced upgrades which can cost
millions of dollars, he says. "We are not investing in building the
next generation of enterprise software. We are focused solely on
providing support."
Moving to a third party for support appeals to
businesses with mature ERP systems, says Ray Wang, partner,
enterprise strategy, at consultancy Altimeter Group. "End-users
need regulatory, tax and bug fixes. This capability is what
third-party suppliers provide, at up to half the cost of existing
maintenance fees," he says.
Continued demand
But the UKOUG’s Miles says the majority of Oracle
users in the UK require the ability to migrate to newer versions,
which means they will stick with Oracle for their support.
"The minority that are prepared to freeze their
current Oracle estate are looking to move away from Oracle," he
says.
SAP senior vice-president Martin Riedel says
customers want to combine new functionality and support rather than
adopt support-only services. The fast and continuous adoption of
the latest SAP ERP release by the installed base demonstrates high
demand for the combined model, he says.
But the trend towards third-party support is unlikely to weaken
as the economy improves. A proliferation of suppliers may
eventually erode the service revenues of big software
suppliers.