How Third Party Support Is Evolving To Add Value and New Services
CIOs need to be sophisticated about both saving money and about finding new ways to amplify the value of their investments in software. Third party enterprise software support is changing to meet more of those needs.
The world of third party support started as a way to reduce the flow of cash to the original vendor, but still allow your company to have help in running mission critical software with a more responsive, relevant service model. That model, which is focused on cost optimization, has plenty of room for growth and continues to play out even as the established vendors fight it tooth and nail. But it is clear that new types of value-add support models are needed for both traditional on-premise and SaaS products.
Recently, I had the opportunity to speak with Seth Ravin, CEO of Rimini Street, about software support optimization and where the market for such services is headed, as well as what the future of SaaS looks like in general. It was a fascinating conversation about how users, rather than products, are becoming the new locus of control and focus for companies.
Woods: What’s the Rimini Street growth story and what kind of company are you today?
Ravin: Recently, we became the first independent third party maintenance product company to become a public company. We’ve grown at over 35% a year in revenue, since 2014 and today we’re servicing over 1,580 active clients around the world, including 95 of the Fortune 500 and Global 100. We have operations in 15 countries now and we’re watching ourselves become a true global player.
Rimini Street is evolving into a much more important player at the table with CIOs, with the IT department, and the CFO organization. We focus on three areas: optimization, extensibility, and orchestration.
Optimization is not just about cost optimization for supporting your existing software release. It’s about spending, it’s about people, and it’s about time.
Extensibility is not only for extending the life of the products, but also extending the functional capabilities of those products. It’s about quickly and cost-effectively modernizing your current enterprise software with the latest desired features and capabilities, future-proofing your technical platforms against yet-unknown technology changes, and securing your system against a constantly evolving threat environment.
Orchestration is about where everything should be run and how it all works together. The move to cloud is only a delivery model. Moving from a traditional, licensed software product to a hosted model (cloud) only changes the delivery mechanism. It doesn’t solve a business problem in and of itself. So you can decide how you’re going to license your software: perpetual, or are you going to rent it by the month or year via subscription. You’re going to decide whether you’re going to put it in your data center or it’s going to be in someone else’s, and then it’s called cloud at that point. Or whether you’re going to change those products out for a different type of product, a SaaS product, which is a multi-tenant product. And some products work better under a SaaS model than others. These are really tactical decisions for a CIO about how they’re going to structure their IT operation. But none of them in themselves change or solve a business issue for the customer.
Woods: So how is Rimini Street and the role of third party support changing?
Ravin: Rimini Street is evolving into a more consultative partner. I spend a good amount of my time consulting with CIOs because they are terrified about two things. First, they’re terrified that there’s so much changing so fast that everybody is asking them to come up with a five-year budget plan, and they don’t know what to budget, or which direction to go in. Second, they believe that every other CIO has figured this out already. And it’s just not true. Everybody is equally confused, equally trying to make sense of the changing landscape, and figuring out what investments to make.
Woods: What do the CIOs you work with think they need to do now?
Ravin: They’re looking at it in a much broader sense, which is, “Okay, I’ve got to fund some sort of what we call digital transformation.” And as you know, it’s an overused word. You ask ten different CIOs what that means, and you get ten different answers. They often don’t fully understand digital transformation in the context of their own business yet. No matter how well they’re doing, nobody has an unlimited IT budget. And I’ll guarantee you, whatever that budget is, it’s not enough to cover the 10,000 things that that company wants to do, no matter how big they are, no matter how successful they are. So everybody deals with scarcity: scarcity of people, scarcity of resources, and scarcity of time. And so Rimini Street’s role is continuing to evolve to help them figure out this puzzle.
Woods: So, in terms of the core and context sort of idea, you’re all about making the context less expensive?
Ravin: That’s right. We are the systems of record guys that are changing the cost structure and helping people make their backend products work better and more successfully, not just extend their life. Because CIOs today, in this terrible situation they’re in, are being asked to provide growth opportunities for their companies. It’s no longer about running a data center. Most of our clients are thinking about going to—and let’s just define this—cloud, not SaaS. And when we talk about cloud, what we’re saying is that the economics of running your own data center simply are disappearing for a lot of customers.
We’re going to provide a new set of services for SaaS products as well. We don’t provide base maintenance because base maintenance is included with the application subscription. But that base maintenance is very narrow. And so Rimini Street is going to compete in the premium maintenance component for these systems, tying it all together in a big comprehensive view for our customers who say, “You know what? Rimini Street, I want you to oversee all of these systems and you will be the frontline maintenance for us on everything. We want your 15-minute guaranteed response, we want your engineering level of excellence, we want your partnership, we want your account management. We want the 4.8 out of 5 that you deliver to us on all of these other services.” That’s a bigger picture of where we’re headed to.
You’re going to potentially see a different model emerge, where Rimini Street starts to partner with some of the vendors who have a bigger vision about we can do something together.
Woods: The Salesforce partnership you just announced is a major step forward for this new SaaS type of offering.
Ravin: Exactly. We are very excited that unlike many other tech vendors, Salesforce sees that some customers are going to want more help, the kind of help we can provide. We were thrilled that instead of fighting against the idea of third party support, Salesforce embraced us so we can increase the service levels to customers who need it.
And our three-tier model of optimization, extensibility, and orchestration is the foundation of this offering. In the SaaS world, much of traditional support for on-premise happens under the covers. It’s far more about value-add.
Woods: I assume that smaller and more emerging SaaS players might not want to even offer value add, premium support?
Ravin: That’s right. Or who don’t have support capability. Remember, a lot of software companies are really good at building software, but they’re not good at providing support, which is a different competence.
Woods: But this is a big change for the third party support model. So far, third party support is about cost reduction and improved service. Money is being spent and the third party support cuts that in half.
But in the SaaS value-add premium support model, you are selling new value. This money is net new. How is that going to change the way you do business?
Ravin: Yes, we work differently in the SaaS based model. When we look at a SaaS world, just to answer the question on SaaS, we break the world down into what we consider SaaS-propensity products, and non-propensity products.
SaaS-propensity products are products that people want to configure; they don’t want to customize them.
Non-propensity products are really more around manufacturing, supply chain, and financials. These products tend to have highly customized code with specialized integrations between them. This is likely why SAP has not had a widely adopted SaaS product. Because the code—getting two customers on the same code line in manufacturing with these highly customized environments, is a really different thing. You could put them into a hosted environment but sharing a code line is a much more complicated process.
As for our support work, Gartner believes that by 2020, up to 10% of traditional licensed software maintenance spend will switch to independent maintenance. When you’re thinking about a $160 billion spend on maintenance, and you think of us at $200 million as the recognized leader in this space, that’s just an unbelievable potential growth curve. We have incredible growth potential. The entire maintenance model is broken and it doesn’t work for a lot of companies, and this is where we come in.
Woods: Well it’s not broken from the vendors’ perspective.
Ravin: Exactly. The vendor is trying to maintain their very profitable business.
Woods: But that’s one of the things I think that a lot of the startup world has missed, is that you want to have power over your customers. The other thing that the startup world has missed is that enterprise sales force is a hugely important engine of sales. You know, one of the reasons Oracle has floated above a lot of its fundamental weaknesses is that their sales force is so strong and they have that market power.
Ravin: But look at how things have changed, right? I truly believe that Oracle and SAP will become less relevant over time. We have so many more products that we’re supporting. I want software to remain relevant. Rimini Street will support all different types of products. We started our offerings in the Oracle world, expanded to SAP, and are moving beyond that.
Woods: I don’t think that’s a strong argument, because alternatives have been slow to appear that can replace Oracle and SAP without a lot of work. They become irrelevant if there’s an alternative that can be easily adopted or if they don’t matter.
Ravin: No. Remember the way that we used to talk about a “shop.” We used to talk about it by the hardware they ran. They’re “an IBM shop.” That’s the way we used to describe it. Then when we moved into the world of “client server” computing, we started in enterprise resource planning – ERP. We started talking in a different way. The ERP vendor became “the shop.” They’re an Oracle shop. They’re an SAP shop. It was an interesting transition. And we believe that the next transition is not about, oh, “they’re a cloud shop.” That’s a delivery model, right? And a lot of people, we think, have missed this. They’re focused on cloud. It’s not the delivery model. We believe the next center of gravity will be around the user.
Because think of this, when I talked about those orchestrate services, look where we’ve gone. We have now gone to this idea that instead of having this big ERP suite, we’re going best-of-breed on everything. We’ve got 100 different apps. Now I’ve got a user. Let’s just put ourselves in the user’s position.
Woods: But what would the word be? You’re a self-service shop?
Ravin: The center of gravity has changed to the user. We think that’s where it’s gone. I’ve got a real problem in the IT world. How do I manage all these applications? I’ve got to provision them. I’ve got to work through security, you know, this person’s got this access. I’ve got to connect to the data via a MuleSoft. I’ve got to use an Okta to connect the front end of a single sign-on and security provisioning. I’ve got a whole different world of problems to deal with. But I’ve got to, in the end, make this work for the user.
Woods: What you’re saying is that increasingly, there’s a level of complexity that the CIOs want to outsource. And Rimini Street is going to be the portfolio support. So as Red Hat has become your open source portfolio support, you will become this portfolio support in these different nests of functionality. So we have a Salesforce-centric nest that has surrounding apps and extensions and integrations. We have an SAP sort of hive, with all of those. You want to make the most of those investments, and so do you really want to have an SAP desk? Or do you want to just get a steady stream of suggestions about what you can do? And then you’re going to be that sort of integrator on all levels.
Ravin: This is where when I talk about reduced influence, when I talk about relevancy, Oracle and SAP are attempting to hold their suite life together. But what’s happening is you’ve got the Workdays, you’ve got 1,000 applications. And when I talk about reduced relevance, it’s because they don’t own that ERP suite. They are not going to be the center of the universe in ten years. We believe that the ERP product becomes part of the suite of portfolio items. And that’s what I mean by reduced relevance. They used to control the environment. Oracle and SAP had command and control of the environment in the past. They are not going to own that environment in the future. They will just be another set of important apps within an environment of 75 or 100 applications, an environment that the CIO in an organization has to figure out how to bring together for their users.
Woods: And so the entire support model will need to change in this new environment, right?
Ravin: Yes. When the business is running better and the customers are happier with the IT operation, there are ways to quantify those benefits. It’s a much more sophisticated discussion than it was 10 years ago. This is where Oracle and SAP are having more trouble because companies are more sophisticated. They’re asking tougher questions than they ever asked before. “Why should I do that upgrade? What value is it going to give me?” Those were not questions software vendors were asked in 1990. It was, “Shut up and do this.”
The database situation, I think, will unravel Oracle faster than anything. We’ve got customers that are turning over 1,500 Oracle databases to us. They want to commoditize them, they want to move them out, and replace half of them with a $100 dollar database. This is what I believe is going to kill them. That’s their bread-and-butter money.
Woods: One of your services is also migration management then?
Ravin: We’re helping customers support those systems, through a long-term migration effort. The customers are done paying for 1,000 Oracle database instances across their organization. They’re done with it and it’s just a question of which ones they can migrate in what order. And we are helping them with these strategies.
Woods: And so what additional roles do you see your company playing in the future?
Ravin: We’re not the catalyst to the big changes occurring in IT. We are a response to a need that’s opening up because of the changes that are happening in the marketplace. This is the kind of conversation I have with CIOs all day long, helping them “aha” moments and realizing that “I don’t have to go that path. I can really look at the path left and the path right.” When you open people’s eyes to options, then you can start to have other conversations about how it’s not necessarily a straight drive and I’m not necessarily just going to upgrade Oracle. I might take a shift to the left and do something different. Part of how we help them on their path is expanding too. We offer managed services and project services across multiple software applications and delivery models. We’re not just a point solution.
Woods: One of the things that I’ve been writing about lately is the idea of a data and analytics halo, where if you want to run an application or a service, the monitoring you get with that service is never sufficient to actually run it in an operational environment. You need to have all sorts of data about your environment and integrate that.
Ravin: Yes, to provide a 360-degree view.
Woods: You’re saying the same thing is true with a larger portfolio.
Ravin: Yes. We want our customers to say, “Listen, Rimini Street, you manage this. We trust you. You are our most trusted provider. You deliver this to us and you take care of this and make this problem go away for me.”