Posts Tagged ‘3PM’

News Analysis: Rimini Street Vs Oracle Ruling Has No Negative Impact on Third Party Maintenance Rights

Recent Oracle vs Rimini Street Ruling Is About Customer Software License Rights Not Third Party Maintenance

On February 13th, 2014, the United States District Court , District of Nevada Judge Larry Hicks issued a partial summary judgment in the Oracle vs Rimini Street Case. Here’s the executive summary to key questions about the ruling*:

Is Third Party Maintenance still valid for Oracle products or anyone else? Yes.  Users should make sure this right is explicit in all future software deals.

Can a customer give a copy to a third party? Yes if you have this in your license agreement.   Users should negotiate this in  contracts to ensure this right exists and remains as part of the ownership experience.

Do you have to read every contract detail before a third party maintenance provider can host the software? Yes. If there are site restrictions  and if you want to host it in a vendor’s own data center.  Make sure you have the right to a site change or site license change.

Can copies of software from customers that are loaded onto the server that are identical to what another customer’s rights be used or reloaded. Yes, the software license goes to intellectual property not to the media.  Third party maintenance vendors can use the same instance in setting up their clients and this will drive down the cost.

Does this ruling impact other businesses? Yes.  If you have no site specific rights, you can’t have a third party outsource or host.  This could have major legal ramifications for Oracle and other vendor’s existing hosting and outsourcing businesses.

Four Customer Cases End In A Draw For Oracle and Rimini Street Based On Contract Law Technicalities

The ruling includes cases from four customers each with unique contract language:

  • City of Flint – US District Court rules In Oracle’s favor. “Based on the court’s ruling s above, none of Rimini’s asserted license provisions (Sections 1.2(b), 1.2( c), or 14.2) expressly authorize Rimini ’s copying of Oracle’ s copy righted PeopleSoft branded software a s a matter of law. Therefore, the court finds that Oracle is entitled to summary judgment on Rimini’s express license affirmative defense as it relates to the City of Flint, and the court shall grant Oracle ’s motion accordingly.

    Point of View (POV):
    The City of Flint’s PeopleSoft contracts were pre-Internet and did not allow for third parties to copy licenses onto other servers on their behalf.  In fact, the licenses only allowed for the City of Flint to provide “access to and use of the Software” to a third party.  The ruling makes sense and is based on how the license contract is written.
  • Pittsburgh Public Schools – US District Court rules In Oracle’s favor. “Based on the rulings above, the court finds that none of Rimini’s asserted license provisions (Sections 1.1, 1.2, or 10.2) expressly authorize Rimini’s copying of Oracle’s copy righted PeopleSoft branded software as a matter of law. Therefore, the court finds that Oracle is entitled to summary judgment on Rimini’s express license affirmative defense as it relates to the Pittsburgh Public Schools, and the court shall grant Oracle’s motion accordingly”.

    (POV):
    Despite Oracle granting the Pittsburgh Public Schools “a nonexclusive, nontransferable license to make and run copies of the Software, “the right to access and use the Software is a separate right from the right to copy or reproduce software”.  The ruling makes sense as with City of Flint based on the language in the original PeopleSoft contract.

News Analysis: New SAP Customers Face Maintenance Hike

SAP Plans A Standard Support Maintenance Fees Hike Of 5.5%For New Customers

For new customers, SAP announced its intent to raise its standard support maintenance fee from 18% to 19% effective July 15, 2013.  The standard support option was reintroduced in January 14, 2010, after much pressure from user groups.  A few key takeaways:

  • Price hike follows original plans. SAP has provided a six month advanced announcement to raise maintenance for new customers.  SAP has noted that “the adjustment does not apply to any existing maintenance contracts for SAP Standard Support closed before July 15, 2013″

    Point of View (POV):
    The announcement follows the original plan for existing customers to bring Standard Support in line with Enterprise Support by 2015 (see Figure 1).  SAP appears to be harmonizing the price increases for both existing and new customers.  While average support and service contracts are between 18 and 21% in the enterprise software world, SAP’s price increase will still keep it within the norm.
  • SAP raises maintenance rates under the guise of quality. SAP claims that the maintenance fee hike is related to “maintaining the same high level of quality support in the future.  Key features include access to support packages, new releases of standard support solutions, enhancement packages, technology updates, ABAP source code for SAP software applications, and software change management.  SAP also requires customers to use Solution Manager.

    (POV):
    SAP’s tried hard to justify the price increase by offering message handling, remote services, SAP Solution Manager Enterprise Edition, and access to SAP Service Marketplace as additional value added benefits.   Unfortunately, most customers find Solution Manager to be a mile wide and an inch deep, the remote services to be minorly useful, and the SAP Service Marketplace to be immature at best.   The result – customers are not getting much value for the price increase. (Fellow Constellation Analyst Frank Scavo provides a list of four questions every new SAP customer should ask.)

Figure 1. SAP Enterprise Support and SAP Standards Support Schedule circa 2010

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The Bottom Line: SAP Wants To Eliminate Standard Support And Competitors to Solution Manager

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Tuesday’s Tip: Act Now To Leave The Door Open For SAP Third Party Maintenance Options

The Real Deadline To Consider Third Party SAP Maintenance Is September 30th

In conversations with hundreds of SAP customers, many have not realized that they must act now in the next 30 to 45 days if they want to move off of SAP customer specific maintenance from extended maintenance for older products. Despite the support window ending in March 2013 for extended maintenance, SAP is requiring organizations to serve notice by September 30th, 2012 (see Figure 1). Key products impacted by this deadline include:

  • SAP ERP 2004 (ECC 5.0)
  • SAP NetWeaver 7.0
  • SAP CRM 6.0
  • SAP SCM 5.1
  • SAP SRM 6.0
  • SAP SRM 5.0
  • SAP CRM 5.0
  • SAP SCM 5.0
  • SAP Netweaver 2004
  • SAP SRM 4.0
  • SAP SCM 4.1
  • SAP R/3 Enterprise (4.7)
  • SAP R/3 4.6C

In past experiences, SAP has taken a hard line on the notification date and customers need to immediately take action should they wish to have the maximum support options available to them.

To be clear, those on SAP’s Business Suite 7 have a longer maintenance support window (see Figure 2.) Those products will be supported with mainstream maintenance until 2020.

Figure 1. SAP Maintenance Strategy and Support Time Lines For Older Releases (2010) Revised With 2012 Version

Figure 2. SAP Business Suite 7 Innovation Road Map Provides Longer Maintenance Until 2020

Customer Specific Maintenance Comes With Many Disadvantages

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News Analysis: UsedSoft Vs Oracle Ruling Opens Up Monopolistic Practices By Software Vendors

Used Software Pioneers Gain A Small Victory In A Shrinking On-Premises Software World

The surprise July 3rd, 2012 judgment by the Court of Justice of the European Union for UsedSoft GmbH v Oracle International Corp rules that “An author of software cannot oppose the resale of his ‘used’ licenses allowing the use of his programs downloaded from the internet”.

“The Court of Justice interprets EU law to make sure it is applied in the same way in all EU countries. It also settles legal disputes between EU governments and EU institutions. Individuals, companies or organisations can also bring cases before the Court if they feel their rights have been infringed by an EU institution.”

The recent ruling on the rights of used software mirrors other rulings in cases such as SusenSoftware v SAP and UsedSoft v Microsoft.  Analysis of the ruling shows that:

  • Exhaustion Rule is now the rule of the land. While the German Federal Court of Justice (BGH) on July 6th, 2000 upheld this legal foundation, many vendors have continued to challenge the case.  In this instance the BGH sent the case to the Court of Justice to interpret the UsedSoft v Oracle International Corp case.  The court deliberated and finally ruled that “The exclusive right of distribution of a copy of a computer program covered by such a license is exhausted on its first sale”.

    Point of View (POV):
    UsedSoft’s primary business model is to market licenses acquired from Oracle customers.  After acquiring rights to the license, UsedSoft’s customers who do not possess the software download the licenses directly from Oracle’s website.  Applied to the “Exhaustion Rule”, this means that the developer’s copyright exclusive right of distribution expires at the time of sale.  In summary, a developer can only make money on the initial sale and any attempt to restrict trade of used software through specific trade terms conflicts with the exhaustion rule.
  • Exhaustion Rule applies to physical and downloaded software. This applies to any on-premises software purchase in person and on-line anywhere in the territory of a Member state of the EU.  The ruling states that “the principle of exhaustion of the distirbution right applies not only where the copyright holder markets copies of his software on a material medium (CD-ROM or DVD), but also where he distributes them by means of downloads from his website.”

    Point of View (POV):
    Oracle’s main argument in the case that the directive does not apply to licenses downloaded from the internet is struck down.  As the highest court in the EU, this ruling is the final ruling.  Downloaded or bought in physical form, exhaustion rule applies to all software including both enterprise, personal, and games.  New acquirer of the licenses can download it directly from the vendor’s site.
  • Software publishers can no longer oppose the resale of the copy of software. The court clarified two points on resales of copies of software.  The first, “Where the copyright holder makes available to his customer a copy- tangible or intangible – and at the same time concludes, in return form payment of a fee, a license agreement granting the customer the right to use that copy for an unlimited period, that right holder sells the copy to the customer and thus exhausts his exclusive distribution right.” The second, “Such a transaction involves a transfer of the right of ownership of the copy. Therefore, even if the license agreement prohibits a further transfer, the right holder can no longer oppose the resale of that copy”

    Point of View (POV):
    The clarifications on the resale of the copy of software have huge ramifications.  Based on the ruling, “the distribution right extends to the copy of the computer program sold as corrected and updated by the copyright holder”.  Users basically have rights to all updates at the time of the sale and this latest version can be sold to the secondary market.  Users who fail to download updates have rights to resell those alterations to the next customer.  The subsequent customer would not have such rights.

  • Software licenses can not be divided in the resale and be reused. The ruling clarifies ownership provisions upon reselling.  “If the license acquired by the first acquirer relates to a greater number of users than he needs, that acquires is not authorised by the effect of the exhaustion of the distribution right to divide the license and resell only part of it”.  “An original acquirer of a tangible or intangible copy of a computer program for which the copyright holder’s right of distribution is exhausted must make the copy downloaded onto his own computer at the time of resale”

    Point of View (POV):
    The court wisely upholds copyright law by requiring the seller to remove the property from their possession prior to resell.  However, the inability to divide licenses means that users will have to be careful about the number of licenses they purchase upfront or purchase with separate contracts to allow for the resell of licenses in the future.

The Bottom Line For Buyers: In the EU You Own Your Software Free And Clear of Vendor Encumbrances

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News Analysis: Spinnaker Expands JD Edwards Support With Versytec Acquisition

Versytec Acquisition Addresses Growing Demand For JD Edwards Support


Denver, Colorado based Spinnaker Management announced on March 6th, 2012 its acquisition of competitor Versytec.  For those who remember their third party maintenance (3PM) history, Versytec was among the first firms to announce third-party maintenance services within a year after PeopleSoft acquired JD Edwards in July 18, 2003.  Constellation estimates that Nashua, New Hampshire based Versytec had between 35 to 40 active 3PM customers.

Third-party maintenance describes support and maintenance offerings delivered by non-OEM providers. These vendors can provide a range of options from basic break/fix to bug fixes, performance optimization, tax and regulatory updates, and customization support. Keep in mind, 3PM does not provide access to upgrades and future versions of the OEM’s product. One big driver is the lower cost of delivery, as much as half the cost of the original vendor’s pricing.  Today most customers pay in maintenance and support the equivalent of a new license every 5 years without achieving the value.  For an average JD Edwards customer that upgrades every 15 years, that’s three times the cost of the original license cost.  In the latest Constellation research report, third party maintenance is one of many strategies to free up millions for customers to fund innovation.

The Spinnaker-Versytec deal is important for a few reasons:

  • Many JD Edwards customers seek alternatives to Oracle’s pricey maintenance fees. Software ownership costs continue to escalate as vendors accelerate their efforts to capture support and maintenance revenues.  From inquiries, surveys, and conversations on the ground, many Oracle JD Edwards World and EnterpriseOne ERP customers seek options to buy-time as they consider whether they upgrade or migrate from their current version.  Why?  Most JD Edwards customers run stable environments and do not gain any value from the Oracle one-size fits all 22% support policy.  Most customers seek phone support and tax and regulatory updates.
  • The market needs more options and choices in the third party maintenance market. Many OEM vendors have gone to the extreme to eliminate third-party options for their customers.  This anti-competitive behavior takes away choice for the customer. A bulked up Spinnaker creates a viable organization that has the critical mass to compete with Oracle.   The combined entity provides third party support services to an estimated 100 160 JD Edwards customers across the globe.
  • Spinnaker Support offers a different approach to third party maintenance. Spinnaker couples its third party maintenance options with consulting services providing a one-stop shop for JD Edwards customers.  Spinnaker also differentiates in its download methodology of customer entitled IP from Oracle.  Spinnaker provides customers with a checklist of what to download prior to migration off Oracle support.

The Bottom Line: Users Must Advocate for Third-Party Maintenance Rights Across the Technology Stack

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Research Summary: Best Practices – Three Simple Software Maintenance Strategies That Can Save You Millions

Forward And Commentary

Software ownership costs continue to escalate as vendors accelerate their efforts to capture support and maintenance revenues. Some vendors have gone to the extreme to eliminate third-party options for their customers. This best practices report examines three strategies to free up unnecessary costs to fund innovation and new projects.

A. Introduction

On average, IT budgets are down from 1-5 percent year-over-year, yet software support and maintenance costs continue to escalate ahead of inflation. Hence, continued pressure on IT budgets and a growing need for innovation projects have top business and technology leaders reexamining their software support and maintenance contracts for cost efficiencies.

Based on experience from over 1500 software contract negotiations, Constellation suggests three approaches to reduce the cost of software support and maintenance. Key strategies include third-party maintenance, shelfware reductions and unbundling maintenance contracts as part of every organization’s tech optimization strategy. Successful implementation can lead to savings from 10-25 percent of the IT budget, freeing up cash to fund innovation initiatives.

B. Research FindingsWhy Every Organization Should Consider Third-Party Maintenance, Shelfware Reductions and Unbundling Maintenance Contracts

Most organizations suffocate from the high and hidden cost of support and maintenance. On average, Constellation’s surveys reveal global IT budgets trending down from 1-5 percent year-over-year since 2008. Consumerization of IT, rapidly changing business models, and aging infrastructure have exposed the high cost of software support and maintenance. Because most organizations allocate from 60-85 percent of their budget to keeping the lights on, very little of the budget is left to spend on new projects (see Figure 1).

Organizations can unlock millions by considering third-party maintenance (3PM), reducing shelfware, and keeping support and maintenance contracts unbundled. Each strategy on its own creates opportunities to drive cost savings. All three strategies combined, provide a roadmap for funding innovation.

  1. Third-party maintenance (3PM) delivers the most immediate cost savings and opportunity for innovation. Third-party maintenance describes support and maintenance offerings delivered by non-OEM providers. These vendors can provide a range of options from basic break/fix to bug fixes, performance optimization, tax and regulatory updates, and customization support. Keep in mind, 3PM does not provide access to upgrades and future versions of the OEM’s product. One big driver is the lower cost of delivery, as much as half the cost of the original vendor’s pricing.  The report shows a survey of 268 respondents and why organizations choose 3PM and who the key vendors are.
  2. Reduction of shelfware remains a key pillar in legacy optimization strategies.  Shelfware (i.e. purchased software, not deployed, but incurring annual maintenance fees) is one of the biggest drains on operational expenses for enterprises. The simple definition of shelfware is software you buy and don’t use. For example, an organization that buys 1000 licenses of Vendor X’s latest ERP software and uses 905 licenses, becomes the proud owner of 95 licenses not being utilized. That’s 95 licenses of shelfware because the user will pay support and maintenance on the license whether or not they use the software or not.  The report details 4 successful and proven approaches.
  3. Unbundling maintenance contracts prevents future vendor mischief. About a decade back, vendors would offer support and maintenance as two separate line items on their contracts. Support would run about 5-10 percent of the license fee and so would maintenance. Keep in mind, average support and maintenance fees were under 15 percent back then. Unfortunately, many users have expressed a growing and concerning trend with support and maintenance contracts. Vendors concerns about support and maintenance contract retentions have led to new initiatives to consolidate contracts. At first glance, this may appear to be proactive and beneficial to customers, but the report details three rationales vendors provide and three strategies how to avoid bundling.

Figure 1. Visualizing the High Costs of Support And Maintenance

(Right-click to see full image)

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Monday’s Musings: Thoughts On How Indian Infotech Companies Can Lead Instead Of Follow

Disruptive Technologies Remain Top Of Mind Among Business Technology Leaders

It’s always a privilege and a pleasure to reach out to clients and prospects around the world.  For those tracking my location, I’ve been in London, San Francisco, and Mumbai over the past 9 days.  The conversations have ranged from social business and enterprise 2.0 tools while speaking at the Tibco tibbr launch; to CRM and social CRM strategies while keynoting at the Microsoft Dynamics CRM 2011 San Francisco launch event.  Despite the range of topics, a few themes keep emerging among buyers:

  • Can you help me figure out what’s hype and what’s real among the disruptive technologies?
  • What technologies will support my new business models?
  • How do I pay for all this “stuff” if I want to go forward?

The good news – pent up demand signals new interest to spend among business technology leaders.  In fact, I’ve spoken with at least a dozen companies investing more into <gasp>… ERP!  The bad news – technology is moving so fast that many organizations can’t keep up with what’s new.  Most organizations can barely keep the lights on.   On my way to Mumbai, the conversations among buyers shared similar themes with one exception – the rise of India in global tech.

Conversations On The Way To Nasscom Focus On India And Its Role In The Global Tech Economy

Now, as many of you know, the trip to India takes almost 24 hours from San Francisco.  By the tenth hour, you and your fellow passengers have watched every movie you can see, poorly slept, eaten 2 meals, and more than happy to strike an intellectual conversation.  For me, trips to India, Brazil, China, and the UAE always provide good data points on disruptive and emerging technology adoption in fast growing economies.   This trip proved no differently.  Surrounded by techies, from the IT and bio tech world, we dove into heated discussions ranging from India’s place in the global tech economy; to inspiring innovation in Indian companies; to China vs India; to the future of outsourcing.

All in all, these conversations reflected the top of mind items in the tech community and mirrored many of the Nasscom agenda items.   Among the NRI’s, a lot of attention discussed the rebalancing of power from the United States to India and China in the tech community.  Among us outsiders, we expressed a respect and recognition for how much India has accomplished.  In fact, most infotech firms have made a shift from provider to catalyst (see Figure 1).  A few market leaders such as Infosys, HCL, TCS, and Wipro remained within striking distance of achieving advisor status in some industries.  Western firms such as Accenture, IBM, and Deloitte seek to move from advisor to innovator status.

Figure 1. Software Insider Stages Of Service Firm Maturity

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Tuesday’s Tip: 10 SaaS/Cloud Strategies For Legacy Apps Environments

Legacy Apps Customers Seek Practical Advice

Organizations determining when and how to make the move to SaaS and Cloud face realistic challenges in gaining buy-in and realizing the apparent and hidden benefits of SaaS/Cloud.  In a recent survey of over 300 companies, 73 respondents who were wary of SaaS/Cloud were asked to list the top 3 reasons they did not plan to deploy a SaaS/Cloud solution in the next 12 months (see Figure 1).  The top 3 reasons related to legacy environments, org structure, and governance include:

  • Legacy apps CIO’s. CIO’s vested in protecting the existing investments may often proceed with caution for SaaS and Cloud solutions.  In some cases, sunk cost mentality takes hold and the goal of being 100% pure with a single vendor clouds the vision to meet needed business requirements.
  • Burden of legacy apps. Legacy apps maintenance and upkeep represents a key barrier to SaaS and Cloud adoption.  Organizations often remain complacent about maintenance and upgrades, preferring to avoid substantial changes and risk.   Becuase the money and resources to support legacy apps consume most of the budget, organizations have little funds for innovation and experimentation.  Eventually, business decision makers procure SaaS/Cloud solutions to by-pass IT.
  • No IT team buy in.  Many constrained IT teams have not taken the time to understand the requirements to support SaaS and Cloud apps in a hybrid mode.  SaaS requires organizations to revisit SOA strategies, integration requirements, and master data management.  Business leaders and decision makers often overlook these dependencies at the organization’s long term expense.

Figure 1.  Legacy Issues Hamper SaaS/Cloud Adoption


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Polls and Surveys: Sapphire 2010 – On The Ground Collaborative Research

Collaborative Research Process At Work

I’m pleased to say, that I’ll be joining fellow Enterprise Irregulars – Michael Cote, Larry Dignan, Michael Krigsman, and Vinnie Mirchandani; SAP Mentors – Dennis Howlett and Jon Reed, along with esteemed journalist Thomas Wailgum from CIO magazine to gauge the sentiment of SAP users.  We may be adding a few others on the ground. But mainly, we’ll be asking a range of questions that include:

  • Confidence in the leadership team
  • SAP Innovation
  • Upgrade sentiments
  • Cloud and ByD
  • Certification of ecosystem partners
  • SAP Sybase
  • NetWeaver Adoption
  • In Memory
  • Third party maintenance.

The Poll Questions

Take the poll at: http://www.surveymonkey.com/s/Sapphire2010

or Click here to take the survey

Your POV.

Ready to rumble at Sapphire 2010!  Look forward to seeing you.  You can post or send on to rwang0 at gmail dot com or r at softwaresinsider dot org and we’ll keep your anonymity or better yet, join the community!

Please let us know if you need help with your apps strategy efforts.  Here’s how we can help:

  • Assessing apps strategies (e.g. single instance, two-tier ERP, upgrade, custom dev, packaged deployments”
  • Optimizing your SAP costs
  • Evaluating SaaS/Cloud integration strategies
  • Assisting with legacy ERP migration
  • Planning upgrades and migration
  • Performing vendor selection
  • Providing contract negotiations and software licensing support

Related resources and links

Disclosure

Although we work closely with many mega software vendors, we want you to trust us more.  SAP is currently a non-retainer client of Altimeter Group and not a client of Insider Associates, LLC.  For the full disclosure policy please refer here.

Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.

Tuesday’s Tip: How To Compare Total Ownership Costs

Apps Strategy Options Abound And Organizations Need Accurate Comparison Methodologies

Recent inquiries from blog readers and client engagements highlight a growing need to compare the cost of apps strategies.  Common comparison scenarios often include:

  • SaaS versus on-premise
  • Upgrade versus customization
  • Single instance versus two-tier
  • Vendor maintenance versus third party options
  • Custom apps versus packaged apps

Cost Comparisons Should Encompass The Software Ownership Lifecycle

An inventory of costs should comprise the phases of application ownership (see Figure 1).  License fees, implementation, and maintenance often define the most common costs.  However, additional factors by phase should include:

  • Phase 1 – Selection. Costs include services such as requirements gathering, vendor selection services, contract negotiation fees, and program management.
  • Phase 2 – Implementation. Costs include projects such as change management, business process reengineering, integration, customization, and testing.
  • Phase 3 – Adoption. Costs include, training, testing, configuration, report creation, and customizations.
  • Phase 4 – Optimization. Costs include upgrade, testing, custom development, and other integration fees.
  • Phase 5 – Renewal. Costs include third party maintenance, management, and vendor selection.

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Tuesday’s Tip: Dealing With Vendor Threats To Charge For Back Maintenance Fees

Four Common Customer Scenarios Will Trigger Vendors To Raise The Back Maintenance Fee Discussion

Back maintenance fees describe the amount an organization would have paid for maintenance if they would have continued to pay the usual stream required to access support, bug fixes, patches, and upgrade rights.  As economic conditions have worsened, many organizations have turned to self-support, third party maintenance (3PM), or dropped support.  Discussions with 43 enterprise software customers reveal four common scenarios (see Figure 1):

  1. Scenario 1: Self supporting customers looking to upgrade to next release. Customers (44.19% n=19/43) in these scenarios typically run mature systems and are in businesses that do not face dynamic change .  They stopped paying maintenance years ago and rarely make major changes to the system.
    Catalyst:  Something happens in the business and the need to upgrade arises.
    Typical vendor response:
    Upgrades can only be provided to customers who pay for maintenance.  Upon payment of back maintenance, upgrades will be provided.  In some cases, vendors also levies a penalty.
  2. Scenario 2: Self supporting customers seeking a major bug fix or regulatory update. Organizations (27.91% n=12/43) in this dynamic have self-supported for years without incident but run into scenarios where their own teams can not resolve an issue.
    Catalyst: Bug fixes and major regulatory changes can not be supported by the internal team.
    Typical vendor response: Bug fixes and regulatory updates can only be provided to customers who pay for maintenance.  Upon payment of back maintenance, patches and regulatory updates will be provided.  In some cases, vendor also levies a penalty. More…

News Analysis: Rimini Street Countersues Oracle

Rimini Street Counter Suit Focuses On Ensuring Customer Rights To Third Party Maintenance (3PM)

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On March 29th, 2010, Rimini Street sued Oracle for “counterclaims alleging copyright misuse, defamation, disparagement, trade libel, and unfair competition”.  The lawsuit was filed as a counter to Oracle’s February 26th, 2010 suit of Rimini Street for Intellectual Property (IP) theft.  While Oracle’s issue at hand was whether or not Rimini Street violated IP rights, the underlying issue focuses on third party maintenance rights.  Statements in the press release highlight the following:

  • Rimini Street is Oracle’s primary competition for annual support services. The third party maintenance leader now boasts 160 employees and a $150M sales backlog.  The release stated a 270 percent year-over-year growth from 2008.

    Point of View (POV): Rimini Street has recently won some large maintenance deals from Oracle.  By supporting Oracle’s Siebel, PeopleSoft, and JD Edwards customers with value based options, it’s inevitable that Oracle would face direct competition.  However, Oracle’s 95% dominant market share leaves plenty of room for Rimini Street to grow and convince customers to switch.  Other competitors such as Spinnaker, netCustomer, and some stealthy system integrators have chipped into Oracle’s lucrative maintenance business.

  • Oracle has a long history of trying to stifle Rimini Street competition. The lawsuit and press release discusses a series of actions taken by Oracle starting in September 2005 with hostile correspondence.  Other actions noted discuss interference with client work in June 2007 and June 2008.  The current lawsuit adds to the list of complaints from Rimini Street about Oracle.

    POV: Rimini Street apparently reached out to Oracle on numerous occasions to discuss how they could work with a third party auditor to confirm Rimini Street’s compliance with Oracle’s procedures.  If Oracle has not responded as Rimini Street states, it points to one data point that Oracle may not be interested in a resolution.  Because maintenance is such a big part of Oracle and other vendor’s revenues, there’s great incentive to keep third party providers away from this market.

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