I first wrote about ERP third party maintenance (support independent of the software publisher) in 2005. Even earlier, I have written about similar offerings like plug-compatible mainframes and specialty auto shops who do better than official dealers.
I have noticed three things in the last decade:
a) most analysts and bloggers do not write much about 3PM – though Pat Phelan at Gartner recently had a long note about it. Analysts, I find, do not find 3PM as sexy as social, mobile, cloud, Big Data coverage.
b) attorneys on the other hand cannot get enough of 3PM, with the continuing Oracle litigation with SAP (over TomorrowNow) and with Rimini Street.
c) customers, however, continue to get more and more comfortable with 3PM as it is a non-disruptive way to get savings on the maintenance dollar and improve quality of service. If they can negotiate other savings in their infrastructure and application management outsourcing, their on-premise ERP costs start to look lot more reasonable and they can maintain status quo which many find stable enough. Many of these customers report they have looked at SaaS options but the migrations are too pricey and disruptive. If SaaS vendors need more incentive to invest in conversion, testing, change management and integration automation tools and to keep their SI partners in check they should periodically talk to some of these customers.
The Gartner note referenced above says “Recent announcements from ERP vendors regarding their cloud ERP and in-memory computing roadmaps have resulted in a spike in the number of inquiries received by Gartner from clients seeking advice about alternative support options. Some enterprises see a major ERP technology change coming, one that may require a repurchase and a reimplementation of their ERP solution or its replacement by a new solution. For these enterprises, remaining on their current software release(s) until they are ready to make the switch to “the next new ERP thing” is a potentially viable choice for their ERP strategy and roadmap.”
Given that, the 3PM promise of “a higher level of service, no required upgrades and annual support fee savings of 50 percent.” sounds pretty attractive.
The publishers themselves have helped the 3PM cause:
- Most on-premise customers have avoided upgrades, the major reason to pay the publisher full maintenance. In my upcoming book, I have research on the snail’s pace at which SAP’s customer base has adopted various enhancement packs, and the caution they are expressing about the next-gen S/4HANA.
- There was an outright user revolt when SAP decided to raise maintenance rates in the middle of the deep last recession.
- Both SAP and Oracle have made tens of acquisitions, but the support has not evolved. It is still siloed by product even as they try to sell broader suites of products.
- Customers, especially in SAP world, have made significant customizations, but the vendor support refuses to acknowledge it is that broader code base that needs supporting.
While some outsourcing firms bundle 3PM as part of their application management and BPO services, Rimini Street has broken out of the pack with dedicated offerings and can boast revenues on a $ 100 million annual run rate. Rimini also keeps moving up-market. It claims to now support 150+ SAP customers representing over $ 100 billion in revenue and in the last quarter announced its largest single deal – an Oracle customer for $ 6.5m in annual fees.
Not really surprising when Rimini customers make satisfied comments like:
- “We have already logged (and resolved) as many support tickets in two months with Rimini Street as we had in the last two years with the vendor”
- “I have the mobile phone number of my Rimini support engineer. Support is a phone call away, rather than having to work through the ticketing system layers at the vendor”
- “Our ratio of IT maintenance costs to innovative projects, which formerly was 70/30, is 50/50. And we envision opportunities to go even further than that, putting even more money into innovation, reversing the original ratio to 30/70.”
So, 3PM may not be sexy enough for many influencers but it sure is for many CIOs.
(Cross-posted @ Deal Architect)