Customers overpaying for ERP support: Rimini Street boss

Customers overpaying for ERP support: Rimini Street boss

High profit margins don't allow room to provide value for the customer, says Seth Ravin

Rimini Street CEO, Seth Ravin

Rimini Street CEO, Seth Ravin

Rimini Street wants to shake up the local market for third-party ERP support, claiming that companies are overpaying for software maintenance, which company founder, Seth Ravin, says earns SAP and Oracle a 90 per cent gross margin.

Ravin is in Australia this week to spruik Rimini Street’s wares alongside Asia-Pacific MD, Andrew Powell. The US-based company has been active in the Australia and New Zealand market for two years and has 11 customers, including Asciano, Australian Agricultural Company, Telstra, and Transgrid.

Rimini sells maintenance services for Oracle and SAP software at a 50 per cent discount over what customers pay for annual maintenance to the vendors.

Ravin told CIO Australia that Rimini Street earns about 55 per cent gross margin on its services.

“We are taking a far less greedy approach for lack of a better term, where we are saying ‘we’re going to make a good profit, we’re not going to make a ridiculous profit. A 90 per cent profit margin does not allow any room to provide value to a customer, that's the bottom line."

He claimed that unlike Rimini Street, Oracle's business model is about reducing the amount of support they provide to drive the high profit margin.

Read: Environmental services company dumps SAP support for Rimini Street, slashes $750k a year in software support costs

Since 2010, Rimini Street has been embroiled in lawsuit with Oracle. Initially, Oracle claimed, among other things, that Rimini did not have the right to host Oracle software on behalf of the ERP giant’s customers.

In February last year, US federal judge, Larry Hicks, ruled that Rimini Street infringed copyrights on Oracle’s PeopleSoft ERP system when providing support to customers.

In August, Hicks also found that Rimini “engaged in theft of Oracle’s intellectual property by repeatedly making multiple copies of Oracle’s copyrighted enterprise software programs to support its software support service clients.”

Rimini Street said it had since made changes to its processes since the February ruling to make its services “legally compliant” but Oracle is still not satisfied, alleging that these practices are "suspect."

“We’ve been arguing with Oracle over a bunch of technicalities … we’ve got a couple of court rulings on a few of them where the court has decided on a few of the items it looks like Oracle is going to be in the right, and on a few of the items they’ve decided that we’re in the right,” Ravin told CIO.

“By the time we are done, we’ll likely be paying something to Oracle,” he said.

“We’ll write whatever cheque we have to in the end and do the right thing but it [the case] is going to go to appeal for years longer,” he said.

Ravin said the organisation has a different relationship with SAP, a framework that enables the companies to communicate.

“When we have issues with each other … we pick up the phone and we deal with it through our relationship. Not that they [SAP] like us any better than Oracle does – we take a huge amount of business and an ever increasing amount,” he said. “But at least we have a dialogue.”

Despite its legal wrangles with Oracle, Rimini Street is pressing ahead with its growth plans. The company hit the US$100 million mark in annual subscription revenue for the year ending December 31, 2014, and sells its wares to almost 1000 customers, including more than 100 of the Fortune 500.

Ravin claimed Rimini is saving organisations are much as 90 per cent of their total maintenance spend over 10 years because they don’t need to pay extra for software customisation and to support complex environments.

He said companies can reallocate these savings in areas such as sales and marketing, and research and development where they need to spend money to generate revenue.

“This is why huge companies are making the move because some of our companies will save US$100 million over a five year period,” he said.

Oracle declined to comment.

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Tags OracleSAPRimini StreetSeth RavinOracle PeopleSoft

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