Third Party Software Support: Yes or No?
Saving 50% could cost you 100%
In January, Oracle sued third party "software maintenance" provider Rimini Street for allegedly stealing Oracle's software and related support materials.
Rimini Street charges customers about 50% of what Oracle or SAP charge for what it calls "software support services." The idea is that you get your software support from them instead of from Oracle or SAP. Their target customers are companies that are very happy with the version of software they are running, have no plans to upgrade the software, and just want to have the minimal level of support to cover tax and regulatory changes. Software maintenance from SAP and Oracle range from 18-22% of the license fee per year, which means that you effectively re-buy the software every four to five years. A company that is happy with their version and who does not want to upgrade, or who expects to phase out the package in several years, could see third party support as a good bargain. I disagree.
Going to a third party for support has its own costs and risks. TomorrowNow, another third party support company, closed its doors in 2008 after they were caught with their hands in Oracle's cookie jar (they had unauthorized access to Oracle's support information, which is what Oracle alleges Rimini Street is doing). TomorrowNow's customers were left in the cold, scrambling to get their software compliant to the latest tax regulations.
It seems to me that you either pay for maintenance or you don't. Really, the owner of the software, the company with rights to the source code, should be the company that supports the software. Yes, you can hire third party consultants to help you configure and deploy the software, but ultimately, it is the vendor that has the deep skills and the incentive to support their software. The cost of maintenance at whatever percentage is a cost of business. If you did your due diligence when selecting the package, then the maintenance cost should not prove to be a burden compared to the benefit of having the software installed and running correctly. If you chose the wrong package, that is a whole other bucket of problems, and going third-party on support is not the answer.
When you pay 50% to some third party to support your ERP system, what are you paying for? Not for access to upgrades - you are now out of support and frozen, as far as your vendor is concerned. Not for the vendor's software patches. You are, again, out of support and frozen. Not for enhancements to the version you are already running. Not for security updates. Not for anything that you would normally get from a vendor. When you do this, you are cut off from your vendor. To get back in "good graces" with the vendor, you need to pay back support or re-license the software to the current version. So, going to a third party is a drastic decision.
For the honor of saving 50% and being cut off from your vendor, what do you get? You get locked into another vendor, one who is actively disliked by the vendor of the software you use to help run your business. One that will be (or is being) sued by your software vendor. You get frozen onto the version of software you are running - no way to upgrade now! You get some regulatory and tax updates from the third party vendor. You get some phone support for questions you may have about your software.
In other words, you are getting about 25% or less of the value of software support for 50% of the fee, and guaranteeing headaches down the road when it comes time (as it will) to upgrade or replace your package. This is a good deal for the third party (while it lasts), but not for you.
There are a lot of ways to save money in IT. Vendor software maintenance is not one of them. Just bite the bullet and pay the maintenance, and make sure to use your software to the maximum to get full value out of it.