Third-Party ERP Support Does Save Money, Nucleus Says
August 24, 2010 Alex Woodie
Nearly all the third-party providers of support for ERP applications do it. They all make the claim that customers can save at least 50 percent off the cost they’d pay to get patches, updates, and tech support from Oracle or SAP. Now, Rimini Street, the largest of the third-party providers, has brought the claim a little more–just a teensy, weensy bit more–substantiation with a commissioned report from Nucleus Research.
The first thing you should know about the five-page research note that Nucleus Research put together for Rimini Street, titled “Benefits from Third Party Support: Rimini Street,” is that it was long on anecdotal remarks from customers, and short on actual data. In fact, the paper didn’t have any hard data born from a scientific analysis of a large sample size. That would be nice for Rimini Street and the media to draw big conclusions from about the third-party maintenance business. But it wasn’t to be.
The only real “data” in the paper is the repetition of Rimini’s oft-said claim that customers routinely save more than 50 percent compared to what they were paying Oracle or SAP. Nucleus apparently came to the conclusion that the claim is valid after interviewing an untold number of Rimini customers.
With that said, the paper, which can be downloaded from Rimini’s website for the price of your personal data, did contain some interesting quotes from customers, who never seem to shy away from bashing Oracle and SAP over high fees–especially when the customers are given the cloak of anonymity.
Here’s one of them: “We were paying $2,750,000 and now we’re paying $750,000 so we save about $2 million. It’s an annual contract with a 5-year price guarantee.”
Here’s another: “Prior to the switch we were paying $1 million annually to SAP. Rimini Street cut it by 75 percent, partly because we cancelled maintenance on somernShelfware which we were not using.”
Nucleus focuses some attention on the elimination of maintenance payments for “shelfware.” Apparently, lots of Oracle, JD Edwards, and SAP customers buy software they never use, and then are forced to pay annual maintenance fees of 20 percent or more. Thanks to the “a la carte” menu offered by third-party maintenance providers like Rimini, customers can get coverage only for the ERP components they actually use. That saves them real money.
Nucleus also highlighted a dubious savings related to upgrades. Since Rimini customers aren’t entitled to ERP upgrades from Oracle or SAP, they no longer invest the time and money to install and test them. But the Rimini customers also lose out on the new features and capabilities that the upgrades bring.
Presumably, the customer wouldn’t install the upgrade unless it was something that improved their ERP system or business processes in some way. The situation gets a little dicey when ERP vendors get tough on upgrades, and withhold support for customers who aren’t current. Still, the “we save money by avoiding new features” argument, which is a variation of the “we save money by freezing all ERP development” argument, doesn’t seem to hold a lot of water, especially for companies that look to continuously improve their business software to drive a competitive advantage.
In the end, the Nucleus study reasserts what we have all held to be true anyway: that SAP and Oracle overcharge for maintenance, and that vendors like Rimini Street can be a great bargain for certain types of customers.