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SCOTT ROBBIN: Seth, tell us about your background and why you started Rimini Street.
SETH RAVIN: Rimini Street is the product of 10 years of work on my part with a focus around a particular business issue. I became intrigued with the fact that current enterprise and core technology software today is very mature and stable. Software licensees are being forced to pay too much for annual support. They aren’t receiving enough value, and they are being forced to devote too many labor resources for upgrades, which are questionable in terms of ROI for many licensees. I originally saw this in the late 1990s as a vice president at PeopleSoft. I had the responsibility for worldwide support policy as well as preparing customers for Y2K. Through that effort, I worked with 4,000 customers around the world for whom I had the responsibility of ensuring they were on Y2K ready releases. Additionally, I had to make sure they had upgraded to the latest, currently supported releases. I discovered that customers were highly resistant to moving from their current releases because of the maturity of what they were already running. The average customer uses only 10 to 20 percent of the enterprise features and functions they purchase. Most of them were just scratching the surface of the value for which they paid. Yet the features and functions were so robust, they really didn’t see any need to move.
It became an issue in my mind because customers were saying they had everything they needed and didn’t want to change. A customer would say, “The only reason we’re moving forward is because you’re telling me if I don’t, you’re not going to take my support calls. It’s a forced decision to move forward, not one I’m making because of good business reasons.” Over the last decade, I set out to solve that issue. I came to the conclusion that customers were simply saying, “I’m going to take my car and drive it until the wheels fall off. Then, I’ll go buy a new car.” In the enterprise software space, that was a new concept. The way it worked in our space was the equivalent of General Motors thanking a customer for buying a car and then saying, two years later, they have decided to retire the model, regardless of the fact that it’s new and works for the customer’s needs. They decide it’s going to be traded in for another car. It doesn’t work that way in any other areas of the business world. A company decides how long it will keep its furniture and offices. It decides when to repaint the buildings. Those are all business decisions made by the company. Regarding the software component, it was the only instance of the vendor telling a company when it’s necessary to make a change. And I changed that model with Rimini Street.
What is Rimini Street’s value proposition for CIOs?
We approach CIOs with two points. First, we want to save them a lot of money. We can save a CIO more than 15 times their current annual maintenance fees over a decade. That includes saving them 50 percent right off the top on the annual fees a vendor charges for annual maintenance for Oracle or SAP. That is just the ‘tip of the iceberg,’ as we call it. In addition, more savings are generated because companies can avoid upgrades to their systems for a minimum for 10 years. To the CIO, we say, “Drive this same car for 10 years or more, and we’ll continue to support it.” The software vendor would force them to make upgrades that could cost millions of dollars for our larger clients. And it’s not something that generally yields ROI for them. Add to that, the savings from having in-house or external resources and headcount required to deal with issues that aren’t covered under vendor support, the numbers quickly add up.
However, we’re offering more than cost savings. We’re offering a much more responsive service model. We have a 30-minute SLA response time, anywhere in the world on a 24/7 basis, with a senior engineer possessing a minimum of 10 years of experience. In actuality, our engineers are reaching the customer back within an average response time of three-and-a-half minutes. One of our customers said it best, “I ask my team not to go to even get a cup of coffee once you put in a ticket with Rimini Street because you WILL get a call within the next couple of minutes.”
When you consider that kind of service, it’s faster than they could work themselves through an Oracle or SAP phone tree and place a call into one of those vendors. It’s a highly-responsive model, including dedicated engineers whom the customers know by name and whom they call directly, rather than contacting a call center. We also offer additional services such as customer optimization, interoperability support, and performance support. These premium-level support features are all things vendors sell for an extra charge, but they’re included in our single price of maintenance, which is 50 percent off of the software vendors’ annual maintenance fees. And because these features eliminate need for the extra maintenance resources and headcount associated with today’s vendor support model, we help companies save up to 90 percent off their total support costs.
Regarding the software support market, what is the size of the market and what do organizations pay on average for this type of support service?
At the highest level, the enterprise software maintenance market worldwide, where people pay for all different types of support, is well over $100 billion per year. That includes all types of software, and it’s an amazing number. Stepping down from there, looking solely at enterprise software for businesses, it comprises about $26 billion. It’s still a very big segment.
Enterprises generally pay Oracle or SAP roughly 22 percent of the license fees for annual maintenance. For every dollar of license fee, the vendors are charging 22 cents per year for maintenance and support, but on top of that, they’re charging annual increases. It also doesn’t cover everything an enterprise software installation would generally require. There are usually significant amounts of customizations done with these large systems, and the vendor only services the vanilla parts. Back to the car analogy, if you customize your car and change or add some extra things to it, the vendor is not going to cover those additions under the warranty. Those are going to be your responsibility.
It works the same way in the software industry. On top of the annual maintenance fee, which can be millions for our larger customers, they also have to pay all the additional costs of supporting those customizations, including fees around any performance tuning, or interoperability with other pieces of software. Additionally, customers need to factor in the extensive cost, time and resources required for software upgrades for many of the older releases, especially if they want to stay on full vendor maintenance and support. None of those things are included in the annual maintenance fee. When you add it all up, the annual maintenance fee is really only a small percentage of the true cost of running the software.
What conversations do you have with CIOs regarding why they should consider Rimini Street’s third-party support for their businesses?
The discussion we have with CIOs today is a very sophisticated one. You have to understand what has changed. In the past, CIOs would receive a notice from their software vendor saying the software version was being retired. They were informed of the need to upgrade to a new version of the software, which could cost millions of dollars in some instances. That was considered the business case, and the CIO would approach the Board of Directors asking for millions of dollars for an upgrade. When the Board asked why, the CIO would explain that the vendor would no longer provide support without the upgrade. In the business case, it was the only basis for the ROI.
This model has drastically changed over the last decade. Because of tighter economics and savvier buying from purchasing groups, we have a lot more sophistication within these organizations. They are now asking true ROI questions. Why should I spend that money? If my software is working the way I want it to work and I don’t need this upgrade, why am I being forced to spend these millions of dollars? I want to change when there are real business benefits, not change for the sake of change. Those discussions are the ones we have with CIOs today.
The answer is no longer one where they just go to the Board and get additional funding. There are more projects on the CIO’s plate today than companies have funding to support.
We’re also having sophisticated discussions today regarding the company’s systems. In some cases, the organization has a very mature ERP system. It’s usually a mission-critical system handling payroll, finance functions, manufacturing applications, and other transactions. But the company is paying a lot of money to the vendor related to this mature software. The company doesn’t want to do an upgrade because they don’t see value in it. We come in and slash their costs, saving them 90 percent in total operating costs. We get rid of the forced upgrade, freeing time and resources to allocate to other real, innovative projects within their organization.
It’s interesting because some people claim we’re killing innovation in the sense that a company using our services won’t be adding new functionality. Using the car analogy, they’re going to drive the same car for the next 10 years. In reality, we’re allowing them to shift funding from older, mature software that runs fine, allowing those funds to be freed up for more innovative projects. We call it innovating around the edges of these core transaction systems that don’t need to be replaced and will continue to work for decades.
What type of feedback are you receiving from CIOs regarding Rimini Street’s support services?
Our organization is now eight years old, and I’ve spent more than a decade working and innovating these systems and processes. While we’re still a relatively new industry, we actually have over 600 customers today around the world. Of those, 71 are Fortune 500 and 15 are among the 100 largest global companies in the world. Rimini Street’s services have now proven that the third-party support model can actually work, from small customers up to the largest transaction systems in the world.
Today, we’re responsible for billions of dollars of transactions each month, with over 20,000 tax updates provided in the last few years alone. Since we opened the doors in 2005, I believe the number of updates is more than 50,000. Looking at the proof points, including the number of customers and the number of years, we’ve seen tremendous feedback. We see this not only in our own internal client satisfaction numbers of over 99 percent but also from the main industry analysts out there at Gartner, Forrester, and Constellation Research. We’ve gotten fantastic feedback, and they have written great things about Rimini Street.
We’ve also experienced a lot of publications out there talking about the successful client feedback and strong level of referrals from existing clients. Recently, Nucleus Research even did a piece where they went out and talked to our customers to validate the savings as well as the ultra-responsive service. It came back with flying colors. It’s proven that we’re delivering the savings, and our customers receiving service calls are getting better service as well.
Do you have any competitors in the market or is your organization one of a kind in the third-party support arena?
We are the first and only pure-play, third-party support organization for enterprise software today. We’re really the pioneers in the industry. Again, we’ve spent years developing these processes that allow us to profitably serve companies with a strong gross margin business, and it’s half the price enterprise software vendors are charging.
The model is very important. We’ve built tools and processes and currently have 20 patents pending. We are the only ISO-certified third-party support provider today, both from a process quality (ISO 9001 certification) and a security perspective with our recent ISO 27001 certification. This means we bring the most rigorous, recognized and secure international standards to the way we deliver our support services. We also bring a technological solution to the table in order to deliver both cost savings and ultra-responsive service with that three-and-a-half minute response time. It’s all part of the key model.
When you think about those benefits, coupled with the huge requirement and responsibility for the global tax, legal, and regulatory updates for up to 200 countries, we’re delivering a very unique set of technology. We don’t have any real competitors today. There are companies that do one-off solutions, but we’re the only ones doing this purely in the industry today.
How is your business model changing the face of the software support market?
There are two things happening to what we call big software, meaning the legacy software providers like Oracle and SAP. There is the change of software to a SaaS model, which is happening in some parts of the industry in terms of the delivery model. It’s another way for customers to have the value of software but provided as a service rather than having it in their own data center. That has put pricing and model pressure on the way big software vendors historically made money with the license fees all coming up front.
Then, you have Rimini Street serving as a sort of bookend on the other side. We’re offering 50 percent off and changing the dynamics regarding when people invest in software, how much they’re investing, when they’re making changes, and how long they’re going to utilize the software in which they’re investing. So, we’re putting two bookends on traditional software maintenance. That’s the first way we’re impacting the legacy software vendors and the market.
The second item is due to the way we’re redefining what’s included in software maintenance. We’re changing the value proposition by combining the savings plus better service, in addition to support for customizations, interoperability and performance not traditionally included that we offer at no additional cost. The fact that we’re doing this for half the price and including those huge components is truly changing and redefining enterprise software support.
Looking ahead, what does the future hold for your organization and for the maintenance and support industry?
Although we were first in this space and certainly way ahead of everyone else’s developments in the enterprise software support segment, this model has worked in many other industries. Continuing with the car analogy, we take our cars to Jiffy Lube for service. Even though we like the car manufacturer, it doesn’t mean we take our cars to the dealer for a $70 oil change rather than the one at Jiffy Lube for $29. Consumers have gotten very comfortable with this general practice.
As another example, when we go to Best Buy and purchase a television, they offer to sell us a third-party warranty and extended service plan. This is also happening in technology on the hardware side. HP will service different manufacturer’s hardware. Companies will service their competitor’s hardware. We’re just the first ones bringing this much-wanted concept to the software segment.
From a demand perspective, consumers want choice. They recognize there are various models, price points, and services for individual needs. We’re simply the first ones to bring consumer choice into the enterprise software space.
When you consider the $26 billion market for enterprise software alone, you can see our growth potential. We’ve been growing at a rate of more than 30 percent each year, and accelerating. We have huge pipelines that are the biggest we’ve seen in our history. We also just announced the next phase of our expansion plans into Asia Pacific and Brazil with a new $15 million round of financing from our partner, Bridge Bank. The principal challenge for us is that demand may exceed our shop floor capacity to add new clients.
Looking at our schedule and plans for an IPO in the near future, these are some of the reasons the market is explosive for us, and we see our model as a huge component of that $26 billion market in the future.
Considering the unique nature of Rimini Street, how is your organization viewed in the overall market?
It’s interesting to try and understand why we are so disruptive to this industry and why our name is in so many publications. We’re only 250 people. But it’s important to look at the size of the companies choosing to make a change. We’re bringing on Global 100, Fortune 500 and other large entities. When customers choose our services, it’s not only due to price and service. Looking at the landscape of what customers face, a cartel exists that includes the software vendor and the systems integrators, such as Accenture and Cap Gemini. It becomes a position where all of these people make money only if the customer is changing something. Buying a new piece of hardware means it has to be implemented. Moving up to a new version of software may mean changing out an operating system. These changes have to be made at the customer environment or no one is making money.
Rimini Street is the only company that comes to the table for these large customers and says we’re going to stop all the change that’s just for the sake of change. We’re going to focus on the ROI and only propose the changes to your environment that make sense and have an actual return on the investment.
That’s why everyone is lined up and viewing us as disruptive. We can bring huge amounts of revenue to a halt for some of these vendors, many of which are working together to force change for the customer that may not actually be needed. When you start looking at it through that lens and following the money, you can understand why there is such a huge, kneejerk reaction of negativity from the software and hardware vendors, systems administration vendors, and systems integrators. We represent significant risk to all the revenue if we bring change to a halt.
Seth Ravin is a 25-year enterprise software industry veteran who pioneered the third-party enterprise software support industry. In 2005, The Enterprise Software Observer named Ravin one of the 25 next-generation leaders of the enterprise software industry. In 2010, he was featured in Deal Architect CEO Vinnie Mirchandani's new book, The New Polymath: Profiles in Compound-Technology Innovations, where he is credited with enacting a visionary, disruptive strategy for dramatically reducing the cost of information technology and ushering in a new era of customer choice.
In September 2005, Ravin launched Rimini Street, Inc. with a mission to redefine enterprise software support using innovative, next-generation support services delivered with more than 50 percent savings in fees compared to a software vendor's annual support program. Rimini Street currently offers support services for SAP software and Oracle' Siebel, PeopleSoft, JD Edwards, Oracle E-Business Suite, Oracle Database software. Prior to his success launching third-party maintenance and support programs, Ravin was an executive with PeopleSoft, Inc., where he served most recently as vice president of the customer sales division. Earlier in his PeopleSoft career, Ravin held several senior roles of increasing global responsibility, including corporate director of customer services and programs and corporate manager of upgrades and installations. Ravin's PeopleSoft responsibilities included worldwide release support policy; release retirement programs; account management; Y2K software update and readiness program management for thousands of licensees; and development and delivery of special support programs for customers with unique needs. To meet the needs of customers wanting to run a mature software release for many additional years beyond the official supported life span of a release without mandatory upgrades, Ravin successfully designed and launched the enterprise software industry's first specialized, extended support programs for Fortune 500, public sector, and midmarket organizations.
Ravin also served as vice president of customer sales for Saba Software, Inc., worked in Russia on defense conversion programs, and worked in Washington, D.C. assisting the Clinton Administration with Congressional passage of the GATT global trade agreement in 1994. Ravin holds a Bachelor of Science in Business Administration from the University of Southern California.
Scott Robbin is a Director at Argyle Executive Forum. In this role, Robbin manages content development, editorial speaker recruitment, and execution for 20+ annual business events. He has more than five years of experience working on the production and implementation of senior-level events. He holds a Bachelor of Arts from Columbia University, where he was the captain of the varsity tennis team.