App Support Upstarts Promise Lower Costs

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February 13, 2006 (Computerworld) --

Rimini Street used a rented truck to market its third-party support services outside a Siebel user conference in Boston last October. Image Credit: Stacy Cowley

For users of corporate applications, it's the annual maintenance fees that make the software really expensive. Now a handful of third-party support services firms are trying to lure IT managers with the following proposition: Turn your maintenance work over to us, and watch your bills shrink by as much as 50%.
The third-party efforts aren't entirely new. For example, TomorrowNow Inc. began offering full-blown support replacement services for PeopleSoft Inc.'s applications two years ago, when PeopleSoft was on the verge of being acquired by Oracle Corp.
But support firms such as Bryan, Texas-based Tomorrow-Now, which itself was bought by Oracle rival SAP AG early last year, are stepping up their efforts to attract users. TomorrowNow said it gained about 75 customers in 2005 while increasing its workforce from 50 to 150 and adding support centers in Denver, the U.K., the Netherlands and Singapore.
Las Vegas-based Rimini Street Inc. officially launched support services for users of Siebel CRM applications last month, and two weeks ago it announced plans to add support centers in Austin and the Pleasanton, Calif., area to augment its facilities in Durham, N.C., and Foster City, Calif.
Another third-party vendor is netCustomer Inc., which is based in San Jose but has most of its operations in Noida, India. It announced Siebel support services last August, adding to existing offerings for PeopleSoft users.
Joe Muhlenkamp, IT director at Big Lots Stores Inc., made the third-party switch in late 2004, just before Oracle bought PeopleSoft. Big Lots, a discount retailer based in Columbus, Ohio, runs an extensive PeopleSoft ERP system that handles human resources and payroll management for the company's 40,000 employees. But Muhlenkamp said he grew disenchanted with People-Soft's support services.
"From a cost perspective, the level of support I was getting wasn't worth it," he said. So Muhlenkamp signed on with TomorrowNow, which issues tax and regulatory updates as well as bug fixes. It also has consultants on call to handle its clients' problems.
"The quality of the updates has been good, and we haven't had any significant support issues," Muhlenkamp said. "Our system is as solid as it's ever been."
Gauging the Risk
Recurring maintenance revenue streams are prized assets for application vendors. And however grudgingly, most users pay up. For example, since it acquired PeopleSoft 13 months ago, Oracle has retained 94% of the PeopleSoft support contracts that have come up for renewal, a company spokeswoman said.
The subscription rate for vendor-provided maintenance "is probably higher than it's been at any point in

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