Rimini Street Slashes Maintenance Costs For Big Apps

Many SAP and Oracle apps customers would rather leave stable products alone than continually change, or “upgrade,” as it is called. For these customers, the cost of maintenance, also known as “buying it all over again every 4 years,” seems excessive. The slow pace of innovation from the mammoth firms, and the even slower uptake of those innovations, amplifies this. (For a recent discussion of this problem, see video highlights from Ray Wang’s keynote speech from the SAP UK and Ireland User Group. I discussed the resounding thud heard from Oracle’s “wait till next year” non-announcement of its Fusion apps here.)

With this backdrop, Rimini Street, one of the pioneering 3^rd-party maintenance firms, recently announced stellar Q3 results: revenue up 200% year over year, and sequential quarter-over-quarter growth continuing: it claimed Q3 invoicing doubled the prior calendar quarter. Rimini Street’s value proposition has steadily attracted customers willing to try a different way. The company claims hundreds of customers since inception, all over the size spectrum. The offer is simple: their base price is 50% of the vendor’s maintenance price.

Rimini Street also offers premium support for sites that have customized the products (and most have), so even wary prospects may want to take a second look. Most customer issues that require attention, the company claims, are fixable. They assert that the average Rimini Streeter has 10-15 years of experience, and each account gets a dedicated engineer. Rimini Street offers a service level agreement of 30 minute response time, and claims an average of 4 minutes. Siebel, PeopleSoft, JD Edwards World and OneWorld are all offered in addition to SAP. Specifics can be found here . In its quarterly results press release, the firm claimed over 90% customer retention. Rimini Street says those who don’t renew are not dissatisfied, but rather have moved to next generation products it doesn’t (yet) support.

In late September, Barron’s reported that Adams Street Partners had invested in Rimini Street for a minority stake, and the funds will be used to grow European operations. Rimini Street has also brought in ex-Sybase CFO and SVP of EMEA operations Pieter Van Der Vorst as its new CFO. In 2010, the firm expects to grow from 130 people to 200 – and to continue to grow its existing footprint in countries like the UK, Germany, Netherlands, Singapore, Australia, and Brazil.

Many of Rimini Street’s customers won’t be named. The vendors being displaced do not look kindly on competition, and some customers are concerned about their response. But Pepsi, Virgin Mobile, and JB Hunt have all been identified, along with extensive coverage of Siemens’ decision to use 3rd party maintenance, and Rimini Street’s website continues to show more client logos as more firms and governmental clients become willing to acknowledge – and praise – their relationships. (Perhaps the EU ought to focus on real competitive restraints that big apps vendors have attempted over the years – to customers’ material disadvantage – here, rather than on unrealized problems that might happen with acquisitions, as it’s doing with the Oracle/Sun deal.)

Risks? To be sure. There is no current litigation against Rimini Street, although Oracle has attempted to bring it into the case against TomorrowNow, which is still in the courts. Seth Ravin, Rimini Street’s founder, is widely regarded as extremely knowledgeable about the nuances of contracts, and the company is confident that legal challenges will not become a problem; it is incorporated in Las Vegas, regarded as fairly unfriendly to the kind of challenges it would be expected to see if Oracle and SAP decide to up the ante. Still, as Rimini Street continues to eat away at a key revenue stream, we may see some fireworks soon. Continued SAP and Oracle customer dissatisfaction with maintenance pricing, even as the two giants grow their margins by raising prices for the “locked in,” is likely to drive solid growth in the year ahead.