JDE Shops Have Plenty of Options for Third-Party Maintenance
February 8, 2005 Alex Woodie
J.D. Edwards shops cringing at the thought of writing 22 percent maintenance checks to Oracle can rest a little easier knowing there are other options, and the ranks of companies offering third-party maintenance programs for World and EnterpriseOne are growing quickly. Two weeks ago, yet another Denver, Colorado, company threw its hat into the third-party maintenance ring, joining three others that have done the same since December.
The latest company to announce third-party maintenance service for J.D. Edwards shops is Conexus Partners, a startup founded by two former executives in J.D. Edwards’ support organization that is located about one mile from the former J.D. Edwards campus in Denver. Conexus joins several other vendors that have promised to provide J.D. Edwards shops with ongoing maintenance and support for a fraction of what Oracle will charge them, including Ciber, Klee Associates, Versytec, and TomorrowNow.
Each of these vendors has promised to provide help desk support, bug fixes, and tax and regulatory updates (such as annual W2 and 1099s) indefinitely for either World or EnterpriseOne (or both, in most cases). Some of differences between the vendors are whether they’ll provide you with general consulting services and whether they are independent or have partnerships with (or are owned outright by) other ERP software vendors.
Whatever the differences, these five vendors are after the same thing: to serve the growing number of World and EnterpriseOne users who don’t want to pay Oracle for support but still want a minimum level of support. While Oracle has not yet raised the annual maintenance fees for World and EnterpriseOne to the 22 percent level it charges for its flagship Ebusiness Suite, there are plenty of JDE shops that aren’t waiting around to find out.
“Customers are somewhat fearful about what’s going to happen next,” says Colin Balmforth, executive vice president of business operations at Conexus Partners, which he cofounded with Jon Mattei, who is also a former J.D. Edwards executive. “What they’re saying to us is that it’s not good, that it’s like blackmail, that the software vendors are driving their business strategy, rather than the other way around,” Balmforth says.
In late January, Conexus announced its “safe harbor” offering to users of various releases of World, EnterpriseOne, and those who use both in coexistence mode. The company currently has 12 employees and several customers, and an arrangement with CH2MHILL Microsource, a very large IT services organization in Denver, to use its facilities and IT infrastructure, which includes the popular Remedy issue tracking system.
Conexus can save its customers 50 to 65 percent off the cost of Oracle’s maintenance fees, while helping them prepare their long-term ERP migration strategy, if that’s what they need, Balmforth says. While Conexus has a partnership with Microsoft, which is encouraging J.D. Edwards shops to adopt its ERP systems, specifically Axapta, Conexus is “vendor-agnostic,” Balmforth says, and will help J.D. Edwards shops move to an ERP system from any vendor, including Oracle.
While Conexus has a J.D. Edwards pedigree unmatched by other third-party providers, it’s still ramping up operations to serve this young market. The company that lays claim to first identifying the market opportunity for third-party maintenance, and moving to embrace it, was Versytec, which first publicized its support offering in June 2004. Versytec had the market all to itself until PeopleSoft relented to Oracle’s hostile bid and agreed to be acquired for $10.3 billion in December.
“Because of the Oracle situation, a lot of people have been trying to jump into the business,” says Steve Striebel, who cofounded the Nashua, New Hampshire, company with his brother, Al, and Ed Hassman, a former J.D. Edwards developer, after scoping out the third-party maintenance market and deciding to focus on J.D. Edwards over Oracle’s ERP system. “We’ve been in operation for 18 months. It takes a lot of initial groundwork before you’re ready to deliver on annual maintenance contracts,” Striebel says. “We actually staffed a support center [in Denver, run by Hassman]. We didn’t just hire one ex J.D. Edwards executive, then use contractors or use affiliations [to do the work]. We have expertise in-house to handle all of World.”
Versytec currently has 30 active customers using its support service, Striebel says, the vast majority of which are World customers, although there are some in coexistence. Versytec’s focus is on providing customer support and maintenance, and the company does not offer generalized consulting services or help with migrations, Striebel says. “TomorrowNow [now a part of SAP] has a good story to tell in the PeopleSoft marketplace. They get a lot of press,” he says. “We’re a completely independent support organization. We’re not affiliated with SAP or Microsoft or Lawson, and we’re not going to be pushing you to go in any other direction.”
Klee Associates got into the third-party maintenance services business in December 2004, as a natural extension of its J.D. Edwards consulting business, called JDETips, says Andy Klee, who’s president of the Denver-area company. “We’d been doing J.D. Edwards consulting and training for many years,” Klee says. Some of his customers asked if they would provide third-party maintenance support, and Klee looked into what it would take to do it, and how many clients it would take to make it work. “I would call it a logical extension of our services,” he says.
Klee estimates that about 25 percent of J.D. Edwards shops are “seriously considering” third-party maintenance (this is just the tip of the iceberg, considering a recent AMR Research survey that found about 65 percent of J.D. Edwards currently on maintenance would stop paying Oracle maintenance if it raised rates). Because of the modifications many J.D. Edwards shops have made to their systems, they can’t use new functionality, delivered via updates, called CUMs, anyway, unless they basically rewrite all of their modifications for each CUM they apply. “Basically, people want regulatory updates, W2s and 1099s. The Canadians want T4s,” he says. “We’ll be doing all those forms on an annualized basis.”
Customers who need a bug fixed, or would like an enhancement to their J.D. Edwards application, can also get that through Klee Associates, but they will pay extra. “We’re going to charge about 25 percent of the current maintenance fees, then anything beyond by the hour,” Klee says. The company has between 10 and 20 customers who have either bought third-party maintenance or have committed to it. Two full-time Klee staff members are dedicated to the third-party maintenance division, while the rest of the work is farmed out to about 30 trusted business partners.
Klee, which also publishes the JDEtips and SAPtips newsletters, will be watching the third-party maintenance business for J.D. Edwards closely, and if it takes off, may offer a similar offering for users of SAP’s business applications. This would put Klee Associates in even closer competition with SAP, which last month bought TomorrowNow, the Bryant, Texas, company that put third-party maintenance on the map in 1998 with its offerings for the PeopleSoft Enterprise ERP application.
TomorrowNow is by far the biggest, oldest, and most successful third-party maintenance provider, but, like most companies discussed in this article, it’s fairly new to the J.D. Edwards space, having just launched its World and EnterpriseOne practices last month (see “TomorrowNow Ramps Up New J.D. Edwards Support Practice”). Being bought by SAP gives it plenty of resources, however, and with Nigel Pullan, a former senior executive at J.D. Edwards, leading the new J.D. Edwards practice, it is able to attract top-notch J.D. Edwards talent, which is on the migratory path these days.
TomorrowNow’s competitors say that being owned by SAP will make it of less value to J.D. Edwards shops. “I was very happy when SAP bought them,” Klee says. “To me, that opened up the market for us quite a bit. Our primary concern is taking care of customers. We don’t have a hidden agenda.”
While TomorrowNow customers will undoubtedly get offers to upgrade to SAP (which isn’t a bad thing, when you consider that R/3 and mySAP are very successful ERP products that also run on the iSeries, unlike Oracle’s Ebusiness Suite), customers who go with a company called CIBER won’t be getting the SAP invite; they’ll be courted by Lawson.
Several weeks ago, Lawson Software announced it had entered into a partnership with CIBER, an international IT services firm located in the Denver suburb of Greenwood Village. As part of the deal, CIBER will provide support services to J.D. Edwards shops that want to migrate in the future to Lawson’s ERP suite, which runs on the iSeries. CIBER is offering maintenance for about half the price charged by PeopleSoft, and Lawson will then cut up to another 50 percent off the cost of its ERP suite. Finally, customers will be able to use CIBER’s data migration tools to move the DB2/400 data from the J.D. Edwards to Lawson formats. CIBER did not respond to a request for additional information by press time.
Right now, there seems to be plenty of room for third-party maintenance providers to service the 2,000 or so World customers, and an equal number of EnterpriseOne customers, in North America. Even if only 10 percent opt for third-party maintenance, that’s 400 customers requiring support, much more than are getting third-party support right now. As this market grows, volume, the force driving the current ERP market consolidation, will also begin to drive the third-party support game. In both cases, one of the keys to winning will be who has the largest number of customers, as well as who offers the fastest and most accurate customer service.
“There are a number of boutique companies who provided services, who have seen the opportunity and gone in with both feet. I don’t think it’s a market they had a background in, and it’s somewhat opportunistic,” says Colin Balmforth with Conexus Partners. “I think there’s quite a bit of business opportunity out there, but you’ll end up with a few dominant players.”