Managing Automation - April 2008 - (Page 14)

joshua greenbaum NOTES Is there still a market for third-party maintenance? By the time you read this, there may have been a resolution to the court case between Oracle and SAP regarding SAP’s TomorrowNow subsidiary, but I doubt it. And even if the court case is settled and TomorrowNow is sold off, the larger question of whether using third-party maintenance providers is a good idea will still be unresolved. So let me try to resolve it here and now: If you’re a shareholder in a large enterprise software vendor, thirdparty maintenance is a very bad idea. But if you’re a customer, thirdparty maintenance is an excellent idea, and a service that you should have the right to use — legally and morally — even if you don’t think you’d ever want to do it. Though the lawsuit — which alleges that TomorrowNow employees stole Oracle’s proprietary support materials — has largely obtained its twin goals of humiliating SAP and shutting down TomorrowNow, it has failed to kill off the third-party maintenance market. Indeed, if anything, the court case has the potential of making third-party maintenance a major new force in the market, to the detriment of Oracle’s finances and, ironically, SAP’s as well. The evidence that customers still want to pay less than the 22% they fork over to their vendors is hiding in plain sight all over the market. The most direct evidence is the continued success of Rimini Street, which was founded by Seth Ravin, the founder of TomorrowNow, and has largely copied its business model — minus the direct attacks on Oracle. Even with the lawsuit and the pall of uncertainty that Oracle would like to cast over the whole concept of third-party maintenance, Rimini has been growing rapidly, in part, according to CEO Ravin, by taking Third-Party Influence josh@eaconsult.com Oracle’s suit against SAP won’t change the fact that users need a third-party maintenance option as long as enterprise vendors charge big bucks for service. over TomorrowNow’s customer base. Rimini’s growth speaks volumes about customer demand for this option. While I would say that most customers should stay on vendor maintenance in order to meet their long-term strategic goals for technology innovation, the cost for many is onerous. The facts that vendor margins for maintenance approach 90% and Oracle’s applications maintenance revenue outstrips license revenue almost two to one (SAP’s maintenance revenue is roughly 10% more than its license revenue) say a lot about how much customers are paying to pad vendors’ profitability every quarter. What’s needed is a compromise, but any possible resolution of the Oracle vs. SAP lawsuit won’t be the way to reach one. Customers that need maintenance shouldn’t be asked to prop up their vendors’ profitability to such an extreme, and those that don’t want maintenance should be free — as in “it’s a free market” — to pick an alternative provider without worrying about a visit from a process server. It’s that simple. SAP started the ball rolling with TomorrowNow, and unfortunately it seems hoist with its own petard on this one. But third-party maintenance is a modern Pandora’s box: Once open, it really can never be shut again. It’s time the industry addressed this problem head-on by looking at ways that the maintenance burden can be reduced. Hiding behind a lawsuit or a divestiture will only stave off the inevitable customer revolt — until it’s too late to do more than capitulate to the inevitable. There has to be a better way. s Joshua Greenbaum is principal of Enterprise Applications Consulting, based in Berkeley, CA. maonline managingautomation.com For more of Joshua Greenbaum’s views, visit: u Performance Anxiety www.managingautomation .com/notes48 u ERP’s Shop Floor Grab www.managingautomation .com/notes47 u As the Call Center Turns www.managingautomation .com/notes46 ma 14 2008 April Photo: David Toerge http://managingautomation.com http://www.managingautomation.com/notes48 http://www.managingautomation.com/notes48 http://www.managingautomation.com/notes47 http://www.managingautomation.com/notes47 http://www.managingautomation.com/notes46 http://www.managingautomation.com/notes46

Table of Contents Feed for the Digital Edition of Managing Automation - April 2008

Managing Automation - April 2008 Contents Take 1 Camstar to Introduce Software that Combines Quality, MES, and Intelligence SAP Revamps Maintenance, Raises Fees 29% New TAGSYS Chief Sees Opportunity in Broader Approach Siemens Turns to Security Weaver for Compliance Supply Chain Company Takes Next Step in U.S. Notes Cover Story: The Long Climb Special Report - Undertanding Enterprise Performance Management Caught Between Supply and Demand Taking Off the Blindfold No Room for Error Product Scan Advertiser Index Next

Managing Automation - April 2008

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