So the Market Works, Right? Not in Enterprise Software This Month

Dennis Byron

If the concern in the enterprise software marketplace over support prices and quality that we blogged about last month is true, then the rules of market dynamics say prices should come down and competitors should pop up all over the place to meet customer demand. So how come SAP exited the business of providing support to Oracle customers this week and also announced that it will begin socking its own ERP customers with higher support/maintenance fees beginning in 2009? The price rise is couched as an elimination of lower-priced support programs; users will be forced to upgrade. The new program will be phased in through 2012 depending on the user's individual contract with SAP.

 

The reason SAP will stop supporting Oracle users via its TomorrowNow (TN) subsidiary is more about criminal rules than market dynamics rules. SAP has been struggling for a couple of years to extricate itself from a messy situation. The aggravation has never been worth the investment it made in acquiring TN back in 2005. The original idea was simply to nag Oracle rather than make money. Instead, Oracle will not let SAP out of the legal process until the case reaches the U.S. Supreme Court (or Larry Ellison retires, whichever comes first, and neither is likely to happen for years). From an investment perspective, SAP has been accounting for TN as a discontinued operation for some time.

 

But it's not a sad story for everyone. Seth Ravin was a co-founder of TN who sold his 50 percent stake in it to SAP and founded Rimini Street, where he is now CEO and President. Rimini was formed that year to do the same thing as TN in terms of supporting J.D. Edwards, Oracle and PeopleSoft users (hopefully without the "inadvertent downloading"), and it added support services for SAP users in May 2008. Presumably, the 50 percent savings it tends to offer users on the average -- according to this table on its Web site -- will get better as SAP prices go the other way.

 

According to Rimini's Marketing and Alliances VP Dave Rowe, Rimini starts by cutting users' current maintenance bill by 50 percent. Then it can often find even more savings by eliminating maintenance costs for shelfware, which suppliers such as Oracle and SAP make difficult to eliminate. It also includes additional service features not offered by the enterprise software supplier like support for customizations, interoperability and performance tuning.

 

Not surprisingly, Rimini's phone's ringing off the hook, according to Dave. Maybe the market does work.



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