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Posts Tagged ‘Third Party Maintenance’

News Analysis: Rimini Street Countersues Oracle

Published on April 5, 2010 by R "Ray" Wang

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.

More…

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

Published on February 22, 2010 by R "Ray" Wang

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

Tuesday’s Tip: The SAP Optimization List – Key Ecosystem Vendors You Should Know

Published on January 5, 2010 by R "Ray" Wang

High Cost Of Ownership And Changing Requirements Drive SAP Users To Seek Optimization Solutions

As users await SAP to regain its mojo (see Dennis Howlett’s post) and implement it’s “Voice of the Customer” strategy in 2010, users must continue to reduce their cost of ownership and complexity (see Figure 1). In addition, rapidly changing business requirements require some users to seek SaaS alternatives, additional point solutions, and extensions.

Figure 1. Cost Reduction Top of Mind for SAP users

Consequently, vendors providing SAP optimization and extension solutions represent one of the fastest growing parts of the $78.7B (2009 Altimeter Group estimate), 850,000 person strong SAP service partner and developer ecosystem. SAP users already embrace many of the solutions from vendors on this inaugural SAP Optimization List as part of their business value oriented apps strategy. The living list covers seven areas including:

application extension and usability;
application life cycle management;
archiving, storage, and data management;
license management and optimization;
Microsoft Office integration;
third party maintenance; and
virtualization

1. Application Extension and Usability

Users often complain about the poor usability of SAP solutions. These solutions allow users to change their user experience with SAP. In some cases, the solutions provide composite app creation capabilities in other tool sets to inter-operate with SAP.

Adobe – provides interactive forms for the SAP environment in both an off-line and on-line deployment. Submitted forms are then entered into SAP. Forms can include validations and other secure features.
ERP-Link – allows users to extend the SAP environment for business intelligence, document management, content management, and composite application creation using Microsoft tools. The i_Net platform creates SAP-Microsoft interoperability.
GuiXT – provides users with the ability to deliver customized user interfaces in SAP applications. GuiXT is often used by clients to simplify screens and user flows without impacting SAP code.

2. Application Life Cycle Management

Whether it may be instance consolidation, upgrades, test data management, or performance planning, these vendors ease the process of managing the SAP application life cycle.

Hayes Technology – assists customers with replicating production application data for dev, testing, and training environments. Gold Client allows organizations to replicate the data sets they need in SAP configuration, master data, and transcational data.
Hyperformix - builds on SAP internal monitoring capability. Organizations gain a performance monitoring tool that identifies hardware, infrastructure, and architecture optimization opportunities.
Intellicorp – provides an artificial intelligence based optimization solution called Live Compare that compares version of SAP for use in testing, upgrade planning, and other life cycle activities. The solution helps clients understand their pre and post environment.
Panaya – delivers a SaaS based optimization tool for SAP upgrades, enhancement packages, and ABAP code cleansing. Customers generate a code analysis to determine differentials between versions. The tool proactively tells user what will break, how to fix it, and where to test.
Tidal Software – optimizes the allocation of SAP support resources through a root cause analysis methodology. Performance, IT Process, and Workload automation solutions address both day to day and upgrade scenarios such as a system refresh.
West Trax – uses a benchmark tool based on over 300 clients in 13 industries to determine system optimization opportunities for upgrades and consolidations. KPI Scan, KPI Optimizer, and KPI QA help organizations identify opportunities, make suggestions, and assist with compliance.

3. Archiving, Storage, and Data Management

EMC – provides content management and archiving solutions to support compliance requirements. Other capabilities include cloning, backup, and recovery, and information protection.
IBM Optim – delivers a suite of integrated data management solutions that includes data privacy, test data management, archiving, retention and E-discovery, and upgrade consolidations.

4. License Management and Optimization

Solutions in this category focus on helping clients manage their license usage. Many large enterprises lack the understanding of how much shelfware may be in production. In addition, the used software market provides users with opportunities to unload or acquire older releases of software.

Flexera (formerly Acresso, Macrovision) - helps clients with a software solution to understand usage, ensure compliance, centralize updates, predict future demand, and improve contract negotiation leverage.
SUSEN Software – provides a market place to buy and sell used software or shelfware.
UsedSoft - supports a market place to buy and sell used software or shelfware.

5. Microsoft Office Integration

Organizations require easy ways to leverage Microsoft Office as an interface into SAP. Common scenarios include Outlook, Excel, Access, and Word integration.

SAP Duet – represents a solution in joint partnership between Microsoft and SAP to provide interoperability. Current users complain about the slow pace of innovation and high cost. A new version addressing these issues will be out in 2010.
Winshuttle – facilitates data exchange between SAP and Microsoft Excel or Access. Winshuttle’s data management tools automate data entry, data download, and reporting tasks for the entire SAP BusinessSuite 7.

6. Third party maintenance

Customers seeking relief from maintenance choose solutions that provide maintenance, tax updates, and regulatory changes for often half the cost of existing SAP maintenance prices. The clear leader in the market is Rimini Street though some other system integrators have been quietly providing such services.

Rimini Street- delivers maintenance options for SAP customers who do not seek to upgrade but would like to keep their existing systems up to date with tax, compliance, and other break-fix issues. Rimini Street’s charter program has met significant success with over 100 client cases for SAP customers.
Your System Integrator of Choice – The recent Siemens SAP maintenance contract negotiations revealed that other vendors such as IBM and HCL were bidding for the maintenance business. Many SoftwareInsider readers have shared with us that many system integrators, especially those in Europe provide such services.

7. Virtualization

Virtualization allows organizations to consolidate server infrastructure costs for development, testing, training, and production environments.

EMC – provides virtualization solutions that include high availability (HA), backup and recovery (BR), and cloning.
VMWare - reduces an organizations physical infrastructure footprint with its solutions. VMWare provides additional solutions that deliver high availability (HA) and disaster recovery (DR). In addition to cost savings, many Software Insider readers report performance improvements.

The Bottom Line – Lots Of Proven Solutions, Expect More Details In Future Friday’s Features

Over the course of the next 6 months, we will be profiling many of these vendors. Key questions that will be answered:

What’s the appropriate use case?
What other customers have used these solutions?
What are sample ROI’s achieved?

Meanwhile, let’s see what news, programs, and innovations develop at SAP’s Field Kickoff Meeting (FKOM 2010) the third week of January.

Your POV.

Have you worked with any of these vendors? Feel free to share your experiences. Am I missing anyone? This list will be continuously updated so please share with us your thoughts. Feel free to post your comments here or send me an email at rwang0 at gmail dot com or r at softwareinsider dot org.

News Analysis: DSAG Project Team Members Resign Leadership of SUGEN KPI Working Group

Published on November 30, 2009 by R "Ray" Wang

DSAG project team and project leader departure could signal disagreement with methodology not SUGEN

SAP embarked on an ambitious program to prove value in its Enterprise Support fee hike last year. As planned, SAP should announce the results for the first set of SUGEN KPI’s in early December. However, two key SUGEN KPI project sponsors (revised 11/30/2009) team members have left from the German SAP user group (DSAG). Confirmed by a spokeswoman to IDG News Service on November 27th, 2009, both project leader Andreas Oczko and project sponsor Otto Schell resigned from their roles on November 18th. Several outcomes may potentially have led to this departure:

The methodology used by the auditing firm (Gartner Consulting) could be quite inconsistent
Teams may not have had enough time to review the data to check for statistical errors.
The KPI’s measured were only the first set, not the complete set.
A few months does not provide enough trending data
SAP’s attempting to announce results prior to when 90%+ of its maintenance renewal occurs in Q4

To be clear, DSAG remains a SUGEN member and has not pulled out of the group or project. The leadership members have just left the project and have been active with the SUGEN group on other projects and issues.

SAP Should Still Be Given Credit For Undertaking A Huge Endeavor

Despite attempting to raise get away with a large (revised 11/30/2009) maintenance fees hike in the middle of one of the worst global recessions, the SUGEN agreement with SAP is a good faith gesture and a step in the right direction. While this is not a legally binding agreement, the deal calls for SAP to limit increases until demonstrable results from the KPI’s have been achieved. This is not an easy challenge but a few props should go out to SAP because:

SAP’s embarking on a risky but unique program to show value
Benchmarking 100 global customers against 10/11 KPI’s creates data consistency challenges
Agreeing to present results in the face of public opinion takes courage

The Bottom Line For Users - Remain Vigilant And Compare SUGEN Results With Your Own

SAP customers should work with their user groups to understand the methodology used and gain access to the underlying data with these 100 customers. Keep in mind SAP’s Value Academy already has benchmarking data for a broader set of customers. The result – selection of the 100 customers by the user groups will significantly impact the outcome. Users should see how their situation fares compared to the benchmarks to gauge their own potential value achieved from SAP’s Enterprise Support

The Bottom Line For Vendors – Provide Customers With Tiered Maintenance Plans

Pressures from SaaS deployments and mid-market competitors will erode the 70 to 80% margins in maintenance fees. Customers will begin to demand third party maintenance options and include such protections in future contracts. Those vendors who keep tiered maintenance based on the life of the product in production will engender the most loyalty by providing customers with the right balance between sustaining maintenance and incentives to upgrade. At the end of the day, customers have to migrate on their own terms. Maintenance fees should reflect the value that customers receive and not be an impediment in the client – vendor relationship.

Your POV.

If you get a chance, let us know:

Which SAP products do you use?
What do you think about the progress on SUGEN KPI’s?
Are you considering alternatives to SAP?
Do you feel SAP is innovating fast, ok, or slow enough?

Feel free to post your comments here or send me an email at rwang0 at gmail dot com or r at softwareinsider dot org.

Tuesday’s Tip: Why Free Software Ain’t Really Free

Published on October 6, 2009 by R "Ray" Wang

Free Software Gimmicks From Some On-Premise Vendors Only Address The License Cost Issue

Recently, readers and clients have been approached by on-premise vendors offering free software modules to incentivize new license purchases. However, free should not be confused with the Open Source (i.e. Freeware) movement, where source code is provided with minimal copyright restrictions. Free should not be confused with any other obligations upon receiving license to that software. Free should not be confused with… well – free! In fact, a closer evaluation of free software should include the following 9 test questions:

Are you required to purchase a minimum amount of some other module?
If you are required to buy a minimum amount, what’s the discount off list for that required module?
Could you get the paid module on its own for less than the discount?
Could you get the free module on its own for less than the discount?
Do you have to pay maintenance on the free module?
What value will be assigned to the software licenses when maintenance is calculated?
Do you get a discounted value for the maintenance on the free software license?
Can you return the free software without any charges?
Can you trade the free software for other products?

The Bottom Line – Calculate The Total Account Value (TAV) When Comparing Software Ownership Costs

Total account value (TAV) provides a methodology to calculate the true cost of ownership over a period of time, typically 10 years. TAV represents what your worth to the vendor and your total costs. Components for a side to side comparison should include the following 10 elements:

License fees
Maintenance fees over a fixed period of time (e.g. 10 years)
Implementation costs
Patching, bug-fixing, and upgrade costs
Testing costs
Training costs
Internal support-related staffing costs
Hardware or hosting costs
Retirement costs
Cost over-runs and that miscellaneous bucket

Use this methodology to compare costs as you figure out your enterprise strategy. This includes total account value cost comparisons such as:

Vendor X vs Vendor Y vendor selection
SaaS versus On-premise ongoing- costs
Third party maintenance versus extended support

Your POV.

Did you really think you’d get free software? Have you done a comparison of your existing costs versus scenarios for a new apps strategy? Need some guidance on TAV? Feel free to post your comments here or send me an email at rwang0 at gmail dot com.

*standard disclaimers apply. always check with your legal counsel and procurement experts before taking any action with your vendor contracts.

News Analysis: Siemens Cancels SAP Maintenance Contract

Published on September 12, 2009 by R "Ray" Wang

Potential Announcement of * Siemens cancellation represents a shift in mood by one of SAP’s most loyal customers

What’s been rumored for the past few months has now publicly been confirmed discussed. Golem.de (Babelfish Translation in English) *Wiwo.de,(Wirtschaftswoche the German equivalent of BusinessWeek) (Babelfish Translation in English) reports that Siemens says SAP Tschüß (i.e. ciao, cheers, bye) in its September 12th posting.

According to the translated report, “Siemens is one of the largest SAP customers, reports the business magazine economic week (Wiwo): Over 160.000 Siemens coworkers used the software of SAP. For maintenance, to the support and regular software actualizations belong, require SAP 17 per cent of the license costs. For Siemens costs add up after analysts estimations each year on a middle two digit amount of millions.”

*What should be made clear here is that Siemens appears to have submitted its cancellation papers to SAP. However, the company will most likely not be doing a rip and replace of its core systems. It’s just looking at alternatives for SAP maintenance or even maybe a better counter offer from SAP.

Third party maintenance vendors emerge from the woodwork

Of note, IBM, and HCL have been listed with Rimini Street as contenders for this third party maintenance (3PM) market. SAP’s system integrators traditionally have shied away or have been rumored to be given strong signals not to provide alternative support options for their vendor partners. To date, this has led to just one public offering from Rimini Street. While the process requires significant investment in engineering and support resources, the contenders each bring significant capabilities to the table. And according to some customers, several other providers have already been providing third party maintenance services for SAP in EMEA.

The bottom line – economic pressures will bring more enterprise software customers to consider (3PM)

Almost all SAP customers have end of year maintenance renewal terms. As these organizations review their maintenance contracts going into 2010, it will be important to consider the role of third party maintenance in decisions. Customers seek strategies to free funding up so they can address economic shortfalls and/or invest in innovation. But don’t expect vendors such as SAP to back off without a fight. Beware of some tactics some vendors have used to cut customers off from the third party maintenance option:

Do not give away your third party maintenance rights. Review your contracts with your legal team for such similar anti competitive language. Validate any suspicious terminology with the vendor
Avoid offers by sales reps to bundle contracts. Once bundled, you will lose the ability to choose what parts of the relationship you wish to change
Say “NO” to contracts that tie upgrade rights to current status of maintenance payments. Some blog readers report a new tactic emerging in the field where even after downloading upgrades to a perpetual license, some vendors are claiming you do not have such rights unless you are current on maintenance. This flies in the face of the spirit and intent of a perpetual license.
Eliminate gag rule clauses in your contracts. Make sure you retain the freedom to work with third parties to assist in contract negotiations. You’ll also want to have the right to discuss some benchmarking with peers and other user group members.

Your POV

Is your enterprise software contract up for renewal? How has your vendor treated you to date? Do you need assistance with negotiating such contacts? Wonder why Neelie Kroes and the EU ( yes this is an election year) or the US Anti-trust team have not stood up for your consumer rights yet? What are your user groups doing to assist you? Post your comment here or reach me direct at r at altimetergroup dot com or r at softwareinsider dot org. Put the power of expert contract negotiation advice to work or drop us a line.

Related posts

20090912 Deal Architect – Vinnie Mirchandani “Don’t Cry For Me Germany”

20090912 Irregular Enterprise – Dennis Howlett “Siemens Cans SAP Support”

*Slight changes were made with some factual review input from multiple sources. (18:30 GMT – 8:00)

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

Published on September 1, 2009 by R "Ray" Wang

Labor Day (US Holiday) traditionally marks the end of summer BBQ’s, the beginning of the fall conference season, and yes, the time to begin a review of your software maintenance contacts that expire end of year. As clients prepare for this seasonal ritual, a few trends in 2009 should set the stage for negotiations:

Continued weakness in the economy. Vendor revenues continue to decline as new license sales drop and vendors become more dependent on support and maintenance revenues. Customers looking to upgrade or commit to new apps can expect vendors to be more generous on the support and maintenance front.
Dated and inflexible architecture of legacy applications. Change in business models, workplace dynamics, and macro economic conditions apply new pressures to aging systems purchased pre-Y2K. Customers seek paths to upgrade but are limited by economic pressures.
Vendor awareness of customer discontent with existing support offerings. Customers now seek to understand what value vendors deliver in their support and maintenance agreements. Many vendors have proactively responded by improving service or making appropriate concessions.
Growing acceptance of third party maintenance (3PM) options. Vendors such as Rimini Street and Spinnaker have proven to the market that they can deliver 3PM to an array of ERP applications. Cutting maintenance fees by 50% or more can free up funds for innovation or pay for the next upgrade.

Align your apps strategy before negotiating contracts – do your homework

Contract negotiations strategy should be planned in conjunction with an overall apps strategy. Begin the process 2 to 3 months in advance. Make sure the teams have the proper incentives in place. Take the following steps as you prepare for your maintenance renewals:

Assess current usage of maintenance and support
Begin apps strategy planning to determine product adoption road map
Conduct an internal license audit.
Determine extent of shelf ware.
Ensure that maintenance contracts are not bundled
Followup with your sales rep

The bottom line – follow the seven simple steps to successfully negotiating software contracts.

Ensure that the right team is in place
Identify the organization’s key business drivers
Determine the product adoption plan
Consider contract strategy implications of the software ownership life cycle
Align contract strategy with product adoption
Identify leverage points
Prioritize key contract objectives

Your POV

Looking to hear your best practices with software maintenance contract renewals.

Is your maintenance contract up for renewal at the end of the year?
Do you need help putting a strategy in place?
Have you conducted an apps strategy assessment?
Would you like to break free from your vendor but don’t know what options exist?

Post your comment here or reach me direct at r at altimetergroup dot com or r at softwareinsider dot org.

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

Published on July 7, 2009 by R "Ray" Wang

In the past 2 weeks, emails from 31 software insider readers highlight a growing and concerning trend with support and maintenance contracts. Vendors concerns about support and maintenance contract retentions has led to new initiatives to consolidate contracts. At first glance, this may appear to be proactive and beneficial to customers. In fact, common rationale provided by the vendor sales reps seem benevolent:

Reduce the time and headaches of managing multiple contracts
Update existing contract provisions
Identify areas of non-compliance.

Keep in mind sales reps have been trained to push these new programs.

The bottom line – users should keep their guards up when vendor sales reps suggest bundling

While the above rationale make sense, bundling often create an all or nothing situation. Basically, it eliminates your options to go with another vendor throughout the 5 phases of the software ownership life cycle (i.e. selection, implementation, utilization, maintenance, and retirement). Convenience of one contract will be offset by 3 scenarios why you should never bundle your support and maintenance contracts:

Lump sum payment. Moving to one support and maintenance contract often means that the annual fees will be paid all at once. If push comes to shove, customers can mitigate this by asking for partial payments or more regular payment plans.
Third party maintenance. Customers seeking to move off of their vendor delivered support and maintenance will find themselves unable to segment out specific products and solutions. Individual contracts by products preserve the option to cancel as needed. In very rare cases, customers have carved out the maintenance for significantly older releases
Replacement strategies. Leaving contracts separate allows for easy replacement of applications. This strategy makes most sense when customers have become a vendor’s customers by acquisition. Leaving contracts separate enables the option to switch solutions, move to a SaaS option, or create more leverage in deals with the vendor.

Be aware of these new efforts to suggest consolidation of contracts. There are very few benefits. Should this be suggested to you, do not hesitate to reach out for advice on strategies to mitigate risk!

Your POV.

In the Enterprise Software Licensee Bill of Rights V2, new rights address this issue. But for now, have you experienced such vendor tactics? Did you manage to segment out your contracts? Do you need assistance with your apps strategy and contract negotiations strategy? Please post here or send me a private email to rwang0 at gmail dot com.

Wednesday’s Whispers: Corporate Whispers and Monthly Market Trends – June 2009

Published on June 24, 2009 by R "Ray" Wang

CORPORATE WHISPERS AND MONTHLY MARKET TRENDS*
Starting this month, we’ll be splitting the trends in Corporate Whispers from the People Whispers series. Catch the latest monthly random thoughts, trend points, and corporate trends. Hearing from twitterati, software execs, and industry experts about:

User trends

Recent win by SUSEN Software over SAP enhances validity of the used software market in the EU. Other players like Used Software have battled Microsoft to open up competition in the market. Many CIO’s hope that Nellie Kroes at the EU will investigate the lack of third party maintenance options and anti-competitive behaviour in some segments of enterprise software (i.e. Oracle DB, SAP, etc.) before her term expires.
Hybrid deployment options continue to gain ground. Conversations with over 101 software decision makers highlight a shift from single source vendor strategies. Move to support hybrid deployments benefit enterprise service bus and integration providers such as Boomi, Pervasive, and Informatica.
Japanese CIO’s finally realizing that they need to break free from their existing ERP software vendor relationships. SaaS options now in consideration. Recent advancements by NTT to host Zoho, Siemens’ 420K employee move to Success Factors, and Flextronics 240k employee deal with Workday have shifted perception that SaaS can’t solve large enterprise requirements.
Conversations with over 100 EMEA decision makers show a big push to move away from a single source vendor strategy. Third party maintenance, virtualization, SaaS, Open Source, and BPO top lists of planned initiatives in 2009/2010.
Support for Apple Macs in corporate environments gaining significant traction. Despite shipment gains, lack of real corporate support models (i.e. go to the Apple Store to fix your MacBook) do not engender the backing of corporate IT support departments.

Software vendor and system integrators trends

Ratios of new license to maintenance revenues shift from 1:2 to 1:4 and in some cases 1:5. Enterprise software vendors now in a better position to convert perpetual business models to subscription business models. Do they have the guts and board approval?
Enterprise software vendors slowly adopting Web 2.0 and consumer tech innovations. Look for improved developments from IBM WebSphere, Microsoft .NET, Oracle Fusion Middleware in the next 6 to 12 months
New Stack Wars will focus on PaaS (Amazon Web Services, Microsoft Azure Services Platform, Google App Engine, NetSuite Business Operating System, Sales Force Force.com platform) vs On-Premise (HP, IBM WebSphere, Microsoft .NET, Oracle Fusion Middleware,) vs Open Source Stacks (BitRock, Covalent, Novell, OpenLogic, Optaraos, Red Hat & JBoss, rPath, Simula Labs, SourceLabs, SpikeSource, Unisys, Virtuas, and Zend.)
Indian System Integrators competiting for market share in Europe, Middle East, and Africa as they shift away from the North American market.
Many enterprises have looked into acquisition and partnerships withAll Scripts – Misys, Cerner, Epic Systems, McKesson, MEDITECH, , NextGen, and Siemens Healthcare (Shared Medical Systems) in order to get in on the proposed healthcare and electronic medical record (EMR) proposals.
One of the first SaaS busts has occurred with LucidEra going under and competitor GoodData offering free safe harbor. Is now the time to make sure SaaS escrows exist?

Your POV

Got a scoop or something to share? What are you hearing in the market? Please post or send on to rwang0 at gmail dot com and we’ll keep your anonymity.

* Not responsible for any factual errors or omissions. However, happy to correct any errors upon email receipt.

News Analysis: Rimini Street Launches Third Party Maintenance for SAP

Published on May 16, 2009 by R "Ray" Wang

Almost one year after Rimini Street announced its intention to provide third party maintenance, on May 11th, 2009, the ground breaking support services provider announced that it had signed its first SAP clients and launched immediate availability of its support services for SAP products. Rimini Street promises to deliver more than 50 percent cost savings in annual fees compared to SAP. Conversations with 83 Sapphire 09 attendees confirm significant interest (79/83) in alternatives to SAP’s Enterprise Support offering, despite the SUGEN announcement. Key elements of the software offering include:

Inclusion of older and current releases. Support for the SAP R/3 4.x, ECC 5.0, ECC 6.0, and BW 3.5 and earlier releases Named, local senior support engineers assigned to each client (no off-shoring of support calls)
POV: In Rimini Streets original announcement, the vendor had intended to provide support for pre ECC products. The move to support the full line will come as a pleasant surprise to many SAP customers who have upgraded to SAP ECC 5.0, SAP ECC 6.0, SAP NetWeaver 7.0, and SAP NetWeaver 7.1 looking for leverage and options to SAP Enterprise Support.
Support through 2020 and beyond. Rimini Street has committed to providing tax, regulatory, and other updates for existing releases without any required upgrades. This includes application fixes for serious issues and tax and regulatory updates as needed and flexible contract offerings.
POV: Rimini Street has demonstrated success to date with acquire Oracle products to deliver such capabilities for existing customers. Multinational customers will want to eavluate details about regulatory support especially in countries such as Brazil, Poland, and Russia. Customers will want to undestand what Rimini Street defines as a serious issue.
Follow the sun coverage by a senior engineer. The announcement states 24×7 support coverage with 30-minute or less guaranteed response by a senior engineer.
POV: A 30 minute response rate by a senior engineer may put Rimini Street in the top echelon of support capabilities. Most vendors and support organizations promise response times of 60 minutes or less with no guarantee of whom may show up on the other line.
Comprehensive support with no additional fee. Support for client customizations, interoperability and performance at no additional fee
POV: No tall order, this third party maintenance provider intends to handle the hairy task of supporting complex environments of spaghetti code and a patchwork of SAP integrations. One would expect Rimini Street to also offer services to streamline environments in order to reduce their cost of support and increase application efficiency.

Conversations with Seth Ravin (CEO) and David Rowe (Senior Vice President of Global Marketing and Alliances) affirm Rimini Street’s
intentions to invest in this SAP practice. Demand for third party maintenance and interest in working for a 3PM company appear to be strong. Many long time SAP employees and support experts have reached out to both Rimini Street and the Software Insider
to seek employment positions.

The bottom line – include third party maintenance (3PM) options as part of apps strategy

Customers must carefully consider when to use third party maintenance as part of their long term apps strategy. When effectively used, saivngs on maintenance fees can be applied to reinvestment and fund new innovation as opposed to feeding the beast! Here’s a quick guide as to what scenarios to use third party maintenance:

Stable apps environment. Often enterprises in this maintain as is scenario find few change requests from the business. Internal support teams already deliver most fixes and changes. A 50% or more cost savings to maintenance makes most sense here.
Post upgrade savings. After completing an upgrade and achieving stability, customers can take the opportunity to enjoy new capabilities without having to pay full maintenance. Customers take a risk here of not receiving any additional functionality and access to new enhancements.
Redeployment “upgrade”. Clients who have made significant customizations and modifications requiring reimplementation for an upgrade will consider third party maintenance for both cost savings and negotiations leverage. Moving to 3PM allows the client to fund the reimplementation or replacement while considering other vendor alternatives.

Third party maintenance may be appealing to most customers. However, there are caveats to third party maintenance that include:

Zero access to future upgrades. Movement to 3Pm means being cut-off from the vendor’s stream of innovation. Customers seeking functionality in future SAP Enhancement Packages (EhP) should not consider third party maintenance at this time. Upgrade to the latest requirements before considering 3PM.
Potential back maintenance issue. Expect vendors like SAP to pressure customers about potential back maintenance. Vendors customarily require customers to true up their maintenance fees should they come back. However, recent amnesty programs by some vendors and the market pressure make this tactic less and less likely. Moving to 3PM actually provides leverage to the customer. Will SAP really threaten back maintenance payments when you are choosing among other vendors now that you are not beholden to them?
Dependency on a third party. As with any other services contract, carefully consider the key SLA’s around metrics, performance, and unforeseen conditions.

Your POV.

Will you be calling Rimini Street in the next 3 months? Do you believe that third party maintenance from SAP is feasible? Does market place choice give you more leverage with SAP? Do you wonder why your system integrators do not offer third party maintenance? Post your thoughts or send me a private email to rwang0 at gmail dot com.