We’ve received a lot of calls from organizations concerned that the cost/value ratios of their existing maintenance/support contracts are skewed. This is not in the least surprising because the increasingly high cost of SAP and Oracle support fees has naturally driven organizations to seek our advice on cost effective alternatives and negotiation strategies. During a slow economy where organizations are faced with finding ways to reduce expenses, this trend is even more pronounced. From what we’ve seen, it is evident that third party support is an excellent option for many organizations. However, it is not right for everyone. In fact, for many organizations the potential savings are not worth the tradeoffs.
Before you seriously consider moving away from your SAP and/or Oracle support relationships, it is critical that you first carefully consider and address the following questions:
1. Is your software application stable and established? If not or if you cannot say with a high degree of certainty that it is, your organization may be better off maintaining its relationship with its existing software vendor. When your software environment is immature and/or continually changing, it is important to stay with your primary software vendor to ensure your organization is able to increase functionality or add licenses when necessary.
2. Does your organization need regular, cutting edge software updates? If yes, third party support may not be for you because your current support plans should include first-rate coverage for these regular upgrades. If, however, you have an established infrastructure that does not need regular updates to keep the business running smoothly, third party support could be a solid option because your organization will not be forced to prematurely and unnecessarily update.
3. Are you invested in your software vendor’s next generation of software? Do you think your organization will use whatever the software vendor’s R&D comes up with in the upcoming months or even years? If yes, you may not want to move away to an alternative support option. Part of what support fees fund is R&D… so if you will benefit from this down the road, you may not want to ruin the symbiotic relationship you have with your software vendor. If, however, you do not believe you will stand to benefit from the results of your software vendor’s R&D/efforts, you have uncovered another reason to transition to a third party support provider.
4. Are you or your legal department overly concerned with the ongoing legal battles Oracle has waged on the market? If yes, you may want to hold off on transitioning to a third party provider as many companies that provide this support are facing legal battles with Oracle. TomorrowNow, Rimini Street and CedarCrestone are three very public examples. TomorrowNow admitted to wrongdoing, but the potentially industry-changing Rimini Street and CedarCrestone lawsuits are still under way and both companies have not admitted to any misconduct. In fact, in a response filed last month, CedarCrestone has actually alleged Oracle has engaged in an “unlawful and systematic attack” against the third party support market and has unlawfully achieved an “overwhelming monoply share” in what would otherwise be a free market for tax and regulatory updates. Depending on the outcomes of these cases your decision to move your support to a third party may prove to be costly. If such support is ultimately deemed an illegal business practice, you and your organization will be faced with two less than favorable options. You can bring the support in house or you can attempt to go back to Oracle. Going back to Oracle for support will require you to pay Oracle back maintenance/support fees plus a significant reinstatement penalty unless you negotiatied the proper protections into your contracts (i.e. maintenance agreement/schedule).
There is no question that the third party support options offered by Rimini Street, Spinnaker Support, netCustomer and CedarCrestone deserve your attention given the high cost associated with your current maintenance/support contracts. They provide a low cost (half price in some instances), personalized and responsive alternative which, for many organizations, is more suitable and attractive than support provided by vendors like SAP and Oracle. For other organizations, however, third party support is simply not appropriate. It is important that you know which type of organization you are before you seriously consider transitioning.
If you determine that third party support is a viable option for your organization, we highly recommend you challenge the various providers to demonstrate how and why their support offering is the best fit for your organization.