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

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.

Oracle and Rimini Street Have An Opportunity To Create A Win-Win-Win for Customers-Software Publishers-3PM Vendors

As more and more customers wise up to the maintenance issue and lack of 3PM rights, Oracle and other vendors need to clearly define the rules as to how 3PM can be provided. The ground rules need to be established on how IP can be protected and customers not be trapped by maintenance.  Rimini Street’s original proposal to have an independent auditor certify policies and practices is a great first step.  Oracle should respond.   Should the court find Rimini Street has taken IP, then it will be more than the vendor’s credibility that’s in jeopardy.  If Oracle succeeds in this lawsuit, they gain some momentum in trying to block third party maintenance.  Hopefully, Rimini Street has played by the rules in respecting IP.

The Bottom Line For Users – Users And User Groups Must Band Together To Guarantee 3PM Rights. Don’t Take These For Granted!

(Because this is such a fundamental user rights issue, here’s the repost of The Bottom Line from the February 22nd, 2010 post. )

Although the latest surveys show a 17 point increase in the belief that 3PM is a right, this right is under fire by big vendors such as Oracle who have taken legal actions against 3PM providers for improperly (i.e. TomorrowNow) and allegedly (i.e. Rimini Street) violating intellectual property rights.  If providers have violated such laws, Oracle rightfully should defend its positions and those providers be punished.  However, there’s a lot of money at stake.  For most vendors, maintenance represents 50% to 80% of their revenue stream.  Consequently, users and user groups have a responsibility to:

• Demand that their contracts include provisions that protect their right to 3PM
• Require vendors to work out rules on how 3PM providers can deliver services without violating software IP provisions
• Seek anti-trust class action with the US DOJ (i.e. Christine A. Varney) and the EU Competition (i.e. Joaquín Almunia) against software vendors who hinder 3PM providers from providing services
• Lobby regulatory authorities to open up third party maintenance as a condition for all future M&A approvals.

Users and user groups must vigorously defend their positions in contracts and legal action or lose this right.  Failure will result in a continued software maintenance monopoly.  Success will ensure market competition and renewed innovation.  Attention: Oracle User Group leadership and Quest leadership your members need your help!

Your POV

Should you have rights to Third Party Maintenance (3PM) ?  Do you feel its okay for your vendor to prevent you from access?  What’s a fair amount to pay for maintenance?  Add your comments to the discussion or send on to rwang0 at gmail dot com or r at softwaresinsider dot org and we’ll keep your anonymity.

Please let us know if you need help with your contract negotiations and maintenance renegotiation.  Here’s how we can help:

• Crafting your next gen apps strategy
• Contract negotiations support
• Free market evaluation to identify contract cost savings

Related resources and links

Take the new and improved survey on 3rd party maintenance

20100329 The Enterprise System Spectator – Frank Scavo “Rimini Street sues Oracle for Unfair Competition and other abuses”

20100329 ZDNet Irregular Enterprise – Dennis Howlett “Rimini Street sues Oracle”

20100329 ZDNet Between The Lines – Larry Dignan “Rimini Street fires back at Oracle”

20100222 Monday’s Musings: Why Users Should Preserve Their Third Party Maintenance Rights

20091008 Deal Architect – Vinnie Mirchandani “Third Party Maintenance Is Really 4 Decades Old”

20071120 News Analysis: Too Early to Call the Death of Third Party Maintenance

20090210 Tuesday’s Tip: Software Licensing and Pricing – Do Not Give Away Your Third Party Maintenance And Access Rights

20090709 Tuesday’s Tip: Do Not Bundle Your Support and Maintenance Contracts!

20090622 News Analysis: Infor Flex Reflects Proactive Maintenance Policy

20090516 News Analysis: Rimini Street Launches Third Party Maintenance for SAP

20090504 News Analysis: Oracle Waives Fees On Extended Support Offerings

20080909 Trends: What Customers Want From Maintenance And Support

20080215 Software Licensing and Pricing: Stop the Anti-Competitive Maintenance Fee Madness

20090428 News Analysis: SAP and SUGEN Make Progress on Enterprise Support

20090405 Monday’s Musings: Total Account Value, True Cost of Ownership, And Software Vendor Business Models

20090330 Monday’s Musings: It’s The Relationship, Stupid! (Part 2) – Stop Slashing The Quality Of Support And Maintenance

20090324 Tuesday’s Tips: Five Simple Steps To Reduce Your Software Maintenance Costs

20090223 Monday’s Musings: Five Programs Some Vendors Have Implemented To Help Clients In An Economic Recession

20081012 Monday’s Musings: 5 Steps to Restoring Trust in the Vendor – Customer Relationship

20091012 Research Report: Customer Bill of Rights – Software-as-a Service

20090912 News Analysis: Siemens Cancels SAP Maintenance Contract

20090910 Tuesday’s Tip: Note To Self – Start Renegotiating Your Q4 Software Maintenance Contracts Now!

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

Apps Users Seek Third Party Maintenance For Cost, Value, and Service

Updated surveys from inquiries, client conversations, and user group meetings show a 113.8% increase in interest in third party maintenance (3PM) services from Q3 2009 to Q1 2010 (see Figure 1).  Key factors stem from (see Figure 2.):

• Continuing cost pressures. Budgets continue to be at flat or have been reduced.  Organizations must do more with less.  Add pressures to innovate, CIO’s must find fat without trimming bone.
• Gaining minimal value in maintenance services. Most felt they were paying too much for too little.  An 8 point jump reemphasized the issue with a lack of tiered offerings.
• Declining plans to upgrade. Worsening economic conditions from Q3 2009 to Q1 2010 led a 27 point increase in interest in 3PM.  Expect many respondents to change their point of view (POV) as economic conditions improve.
• Expecting better service. Service continues to play a key factor in decisions to go to 3PM.  Over 60% of respondents had experienced poor levels of service.
• Slowing pace of vendor innovation. Greater than half of respondents believe their vendor has been too slow to deliver new capabilities. These include SaaS deployment options or key functionality in areas such as strategic HCM and social CRM.
• Disliking the vendor. About 1/3 of the survey respondents have bad experiences with their vendor.  Many times it comes from sales person or support rep experiences.
• Delivering self support. Almost 30% of respondents already provide their own support.  These organizations have no need to pay maintenance when they are doing all the work.

Figure 1. Interest in 3PM grows 113.8% over 2 quarters.

Figure 2. Cost Pressures, Value, And Decision Not To Upgrade Drive Current Trends to 3PM

Limited Options Exist For Most Enterprise Apps Customers

Of the 101 respondents in Q1 2010 interested in 3PM, Oracle (88.1%) and SAP (76.2%) users expressed the greatest interest in seeking independent services (see Figure 3).  Over 80% of the users were from large companies greater than 1000 employees across the globe.  Most SAP users surveyed have mixed environments with Siebel, JD Edwards, and PeopleSoft joint installations.  Unfortunately, very few public options exist for sole SAP users (see Figure 4).  For example, SAP customers can only turn to Rimini Street.  Oracle customers on PeopleSoft, JD Edwards, and Siebel also have limited choices with Rimini Street, netCustomer, and Spinnaker among the options.  IBM, Infor, Lawson, Computer Associates, Epicor, Microsoft Dynamics, Oracle E-Business Suite and database customers have no options.  (Note: This data may not be completely statistically significant given the sample size of 240, but hopefully it provides some directional input.)

Figure 3. Oracle And SAP Users Drive Interest In 3PM

Figure 4. Very Few Public Options Exist For Customers

The Bottom Line For Users – Users And User Groups Must Band Together To Guarantee 3PM Rights. Don’t Take These For Granted!

Although the latest surveys show a 17 point increase in the belief that 3PM is a right, this right is under fire by big vendors such as Oracle who have taken legal actions against 3PM providers for improperly (i.e. TomorrowNow) and allegedly (i.e. Rimini Street) violating intellectual property rights.  If providers have violated such laws, Oracle rightfully should defend its positions and those providers be punished.  However, there’s a lot of money at stake.  For most vendors, maintenance represents 50% to 80% of their revenue stream.  Consequently, users and user groups have a responsibility to:

• Demand that their contracts include provisions that protect their right to 3PM
• Require vendors to work out rules on how 3PM providers can deliver services without violating software IP provisions
• Seek anti-trust class action with the US DOJ (i.e. Christine A. Varney) and the EU Compeition (i.e. Joaquín Almunia) against software vendors who hinder 3PM providers from providing services

Users and user groups must vigorously defend their positions in contracts and legal action or lose this right.  Failure will result in a continued software maintenance monopoly.  Success will ensure market competition and renewed innovation.  Attention: OAUG, Quest, and SUGEN leadership your members need your help!

Figure 5.  A Growing Body Of Users Believe 3PM Is A Right

The Bottom Line For Vendors – Proactively Address The Issue Or Expect A Groundswell Of Activism

SaaS, subscription pricing, 3PM, and the economy provide a confluence of forces that will continue to attack maintenance revenue streams.  Many legal cases have been fought over this issue including IBM vs Amdahl and Geac vs Grace Consulting.  SAP’s failed attempt to convince customers on the value of Enterprise Support led to a public relations disaster and a factor in the resignation of their CEO.  The result – many vendors considering price hikes held back.  In fact, some savvy software vendors retooled and restored the client -vendor relationship by:

• Offering more entry points and tiers to support options. The three pillars of software maintenance and support policies still apply.  However, several vendors are now offering more tiers of support as lower entry points.  Two vendors have finalized plans to offer just the bare bones legal and regulatory updates.  Other vendors have made it easier to come back with maintenance amnesty plans.
• Providing flexible maintenance policies. Vendors who change rigid policies have experienced success among customers.  Some Both Infor through Infor Flex and Micrsoft Dynamics allow like for like swap credits to migrate between existing products.
• Renegotiating existing terms. Some vendors are helping clients meet the realities of the current market conditions. Big on the list is helping clients address shelf ware without repricing of contracts.  For clients who paid full maintenance on software that’s at least 4 years old, some vendors are offering to reduce up to 20% of the overall licenses not in use.  This leads to lower maintenance revenue but engenders good will among key clients.  Further, several vendors have allowed clients to apply credit towards another module as an alternative.
• Delivering amnesty programs. Several vendors have allowed customers to return to maintenance programs after years of not paying.  Such programs play a key role in helping customers upgrade but should be used sparingly as customers may become accustomed to this practice.
• Creating better peer forums to share information. Almost every vendor surveyed has a program to improve the online support capabilities.  Applying Social CRM use cases,  user generated content in peer forums tops the list of initiatives.  Other plans focus on sharing data on benchmarks, operational metrics, and best practices.
• Assisting with vendor financing. Clients seek access to financing, especially many in the mid-market who’s credit lines have been zapped.  Microsoft has led the charge by providing 0% financing for its Microsoft Dynamics ERP and Microsoft Dynamics CRM Customers.  Other vendors such as IBM, Infor, Oracle, SAP, Sage also offer vendor led financing programs that include hardware, implementation, training, and other services.
• Lowering cost of usage and ownership. Though tops on the list as a conceptual practice, most vendors will need to roll out such initiatives over the next 24 months.  A few notable exceptions include Agresso with its VITA architecture which allows customers to rapidly make business and UI changes, Microsoft Dynamics customers who report back significantly lowered implementation and training costs compared to most vendors, and Epicor customers who report significant productivity gains with Service Connect.  SaaS customers already experience such gains.

Your POV

Take the new and improved survey on 3rd party maintenance and let us know if you need help with your enterprise apps strategy by:

• Conducting an ROI on 3rd party maintenance options
• Identifying cost reduction opportunities
• Renegotiating your software contracts
• Improving innovation via SaaS and other deployment options

Please post or send on to rwang0 at gmail dot com or r at softwaresinsider dot org and we’ll keep your anonymity.

Related resources and links

20091008 Deal Architect – Vinnie Mirchandani “Third Party Maintenance Is Really 4 Decades Old”

20071120 News Analysis: Too Early to Call the Death of Third Party Maintenance

20090210 Tuesday’s Tip: Software Licensing and Pricing – Do Not Give Away Your Third Party Maintenance And Access Rights

20090709 Tuesday’s Tip: Do Not Bundle Your Support and Maintenance Contracts!

20090622 News Analysis: Infor Flex Reflects Proactive Maintenance Policy

20090516 News Analysis: Rimini Street Launches Third Party Maintenance for SAP

20090504 News Analysis: Oracle Waives Fees On Extended Support Offerings

20080909 Trends: What Customers Want From Maintenance And Support

20080215 Software Licensing and Pricing: Stop the Anti-Competitive Maintenance Fee Madness

20090428 News Analysis: SAP and SUGEN Make Progress on Enterprise Support

20090405 Monday’s Musings: Total Account Value, True Cost of Ownership, And Software Vendor Business Models

20090330 Monday’s Musings: It’s The Relationship, Stupid! (Part 2) – Stop Slashing The Quality Of Support And Maintenance

20090324 Tuesday’s Tips: Five Simple Steps To Reduce Your Software Maintenance Costs

20090223 Monday’s Musings: Five Programs Some Vendors Have Implemented To Help Clients In An Economic Recession

20081012 Monday’s Musings: 5 Steps to Restoring Trust in the Vendor – Customer Relationship

20100114 News Analysis: SAP Revives Two Tier Maintenance Options

20091012 Research Report: Customer Bill of Rights – Software-as-a Service

20090912 News Analysis: Siemens Cancels SAP Maintenance Contract

20090910 Tuesday’s Tip: Note To Self – Start Renegotiating Your Q4 Software Maintenance Contracts Now!

20090602 Tuesday’s Tip: Now’s The Time To Consider SaaS Software Escrows

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

Microsoft Dynamics Demonstrates Continued Industry Solution Investment

Today’s announcement focuses on the Microsoft Dynamics AX product line.  Key facts include:

• IP acquisition only. Microsoft acquires the intellectual property (IP) for three four industry solutions.  These solutions build on the Microsoft Dynamics AX platform.  Microsoft has not acquired the companies or personnel.   Fullscope, Inc.; Computer Generated Solutions, Inc.; LS Retail, and To-Increase (Columbus IT) remain fully independent and partners within the Microsoft Dynamics ecosystem.
  
  POV:  Unlike other mergers and acquisitions, Microsoft embeds proven and market tested solutions into the core code base.  IP acquisitions provide immediate value without the typical hassles of post-merger integration.  Placing the IP into the main Microsoft Dynamics AX code line ensures consistency.

• Commitment to upper mid-market requirements. Mid-market sized businesses require deeper levels of vertical and industry functionality.  Today’s announcement demonstrates a commitment to expanding manufacturing, service industries, and retail capabilities.

  POV: Last mile solutions make or break upper-mid-market organizations.  Creating a broader set of common industry capabilities that sit on top of core Microsoft Dynamics AX accelerates both Microsoft and its partners ability to extend vertical capabilities.  Theses solutions come from partners with proven records in delivering to customers.

Acquisition Focuses On Industry IP From Proven Partners

Partner IP selected for acquisition represents the most successful and recognized solutions within the Microsoft Dynamics ecosystem.  Customers can immediately access professional services and process manufacturing capabilities.  Retail solutions will be shortly announced.  Key details for the three industries include:

• Process manufacturing from Fullscope, Inc. The process manufacturing solution encompasses the entire process manufacturing life cycle and addresses engineer to build.  Key verticals supported include chemicals, food & beverage, life sciences & pharmaceuticals, pulp & paper, and primary metals.  Fullscope garners many Microsoft awards including Partner of the Year for 2007 to 2009.

• Professional services from Computer Generated Solutions, Inc. The professional services solution provides project based solution (PBS) capabilities that track time and expense, improve project profitability, and optimize resource utilization.  Key verticals supported include advertising & marketing, architecture & engineering, government contracting, legal services, and management & IT consulting services.  CGS was recognized as a 2007 Microsoft Dynamics Inner Circle member.

• Retail solutions from LS Retail EHF and To-Increase (Columbus IT)*. The LS Retail  solutions focus on delivering end to end retail and POS integration to Microsoft Dynamics AX.  Key features include 6-level item hierarchies, auto item creation, pricing management, purchasing, distribution, loyalty programs, concession management, and hand held support.  The solution is optimized for fashion retailers though other verticals have successfully deployed this product.

  To-Increase A/S, the software development arm of Columbus IT, provides Retail Chain Management solutions.  Key features include both front office (CRM) and back office integration.  The solution includes features such as centralized campaign management, pricing management, inter-company trade, integrated return management, credit risk management, multi-currency, and online Axapta POS integration.  Columbus IT has seen succes in key industries such as Furniture, Gas Stations, Groceries, Healthcare & Cosmetic, and Sports and Fashion.*

The Bottom Line – Microsoft Dynamics AX Users And Partners Can Expect More IP Acquisitions

Building off the experiences from Industry Builders Initiative (IBI) and Certified for Microsoft Dynamics (CfMD), the latest strategy by the Microsoft Dynamics team to accelerate industry vertical innovation for customers and partners provides a pragmatic approach.  Customers expect Microsoft to take the lead in orchestrating common industry capabilities while also providing a stable platform for core Microsoft Dynamics AX capabilities.  Acquiring the IP of proven solutions in the market plays to Microsoft’s strengths by leveraging the ecosystem for innovation while embedding key common business processes.  The result – a more predictable roadmap and a single architecture for customers and partners to expand on.  Pending the success of these IP acquisitions, one can expect more to come as this becomes the model to most efficiently deliver on industry vertical innovation.

Your POV

As an SMB, do you feel Microsoft has the right level of depth in its industry offerings?  Are you in the midst of an SMB ERP vendor selection and are confused by all the choices?  As a partner, do you feel this approach is fair to your investments?  Look forward to your comments or hearing from you.  Post your comments or send a direct email to r at altimetergroup dot com or r at softwareinsider dot org.

* (added 9:23 am GMT-8:00)

Copyright © 2009 R Wang. All rights reserved.