Understand Your Support Options and What They Mean to Your Organization’s Internal Roadmap
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You’ve spent years of effort and significant amounts of money building and investing in the PeopleSoft solutions that run your organization. You probably know you have support options outside of Oracle support but how do you know if they are right for you? Join Rimini Street and learn the questions you should ask yourself about third party support. This session will contain real-world examples and will provide insights and specific steps to maximize your own strategic direction going forward.
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Understand Your Support Options and What They Mean to Your Organization’s Internal Roadmap
- 1. QuestDirect.org Understand Your Support Options and What They Mean To Your Organization’s Internal Roadmap Frank Reneke Group Vice President, Corporate Strategy Rimini Street, Inc. freneke@riministreet.com
- 2. Property of Rimini Street ©2013 | Proprietary and Confidential2 Agenda The Software Maintenance Problem Real-World Customer Examples Q&A Future Proof your Application Strategy
- 3. Property of Rimini Street ©2013 | Proprietary and Confidential3 The Software Maintenance Problem High Cost, Low Value Maintenance Expenses Limit Innovation 20% New IT Initiatives 80% Ongoing Operations and Maintenance *Gartner; “Gartner's Top Predictions for IT Organizations and Users, 2012 and Beyond: Control Slips Away”, November 23, 2011
- 4. Property of Rimini Street ©2013 | Proprietary and Confidential4 Your Enterprise Software World Has Changed
- 5. Property of Rimini Street ©2013 | Proprietary and Confidential5 Vendor support does not address the majority of issues in today‟s mature, stable software related to customized code 85% of Priority 1 issues are related to custom code Software Vendor Support Not Relevant
- 6. Property of Rimini Street ©2013 | Proprietary and Confidential6 A New Support Model is Needed
- 7. Property of Rimini Street ©2013 | Proprietary and Confidential7 What are Your Total Maintenance Savings?
- 8. Future Proof your Application Strategy
- 9. Property of Rimini Street ©2013 | Proprietary and Confidential9 CIO’s Faced With a Dilemma Choosing between Apps Unlimited and Fusion Vs. Fusion • Using latest technologies and processes • Needs time to mature • Oracle may eventually “force” customers to Fusion** • Coexistence best option Today Applications Unlimited • Mature and highly functional applications • High maintenance costs • Expensive to upgrade • Diminishing enhancements • Expected finite timeline* • 73% upgrading just to stay supported* * “ERP Upgrades: What‟s Your Philosophy?”, OAUG Research Line, February 2012 Fusion Applications Oracle Fusion Financials Oracle Fusion Procurement Oracle Fusion Human Capital Management Oracle Fusion Governance, Risk and Compliance Oracle Fusion Customer Relationship Management Oracle Fusion Project Portfolio Management Oracle Fusion Supply Chain ** “Oracle‟s Dilemma: Applications Unlimited Versus Oracle Fusion Applications”, Forrester Research, Inc. February 11, 2013 and OAUG member survey
- 10. Property of Rimini Street ©2013 | Proprietary and Confidential10 Important Report to Help Access your Oracle Strategy • Oracle‟s application revenues have hit pockets of weakness in the past two years* • Oracle‟s clients show limited interest in or adoption of Oracle Fusion* • To restore application revenue growth, Oracle will have to kick Start Fusion demand* • The current middle path of talking about Fusion while providing no disincentives against clients staying on existing apps will lead to mediocre growth. Our bet is that Oracle will push Oracle Fusion Applications. * • Oracle customers must consider all available options ** * “Oracle‟s Dilemma: Applications Unlimited Versus Oracle Fusion Applications”, Forrester Research, Inc. February 11th, 2013 ** “Oracle Customers must „Consider All Available Options‟, The Wall Street Journal, June 5th, 2013
- 11. Property of Rimini Street ©2013 | Proprietary and Confidential11 Strategic Choices are Needed Short, Medium and Long Term Short Term • Ensure systems solidly support business needs • Adopt innovation to drive competitive advantage Long Term • Position organization to take advantage of best next-generation software platform • Adopt solutions that are proven 1-3 Years 4 - 6 Years 7 – 15 Years Medium Term • Maximize return on investment • Be prepared to adapt to new trends with solutions from current and new vendors • Begin positioning for next- gen platform
- 12. Property of Rimini Street ©2013 | Proprietary and Confidential12 Future Proof your Application Strategy • Each upgrade will further locks you into Oracle‟ application and technology stack offering • Eventual move to next-generation system will be full reimplementation cost; keep options open to retain flexibility and reduce risk. • Money spent on Coexistence lost? • Vendor upgrade path requires expensive upgrades and maintenance fees for 5-10 years until future systems are built, widely deployed and tested Vendor Upgrade Path Next-Generations System Options $ $ $ Upgrade Re-implementUpgrade
- 13. Property of Rimini Street ©2013 | Proprietary and Confidential13 Future Proof your Application Strategy • Each upgrade will further locks you into Oracle‟ application and technology stack offering • Eventual move to next-generation system will be full reimplementation cost; keep options open to retain flexibility and reduce risk. • Money spent on Coexistence lost? • Vendor upgrade path requires expensive upgrades and maintenance fees for 5-10 years until future systems are built, widely deployed and tested Next-Generations System Options Select Best Fit Next- Generation System Third-Party Support $Adopt Innovative Solutions as Needed
- 14. Real-World Client Examples Total Maintenance Savings- Client Case Studies
- 15. Property of Rimini Street ©2013 | Proprietary and Confidential15 $900M DISTRIBUTION COMPANY • This company will save 1.5 times their Oracle annual support fees each year by switching to Rimini Street Support • The example below highlights how this company will save $508,004 EACH AND EVERY YEAR for the next 10 years for a Total Maintenance Savings of $5,080,040 * $150,000 full loaded FTE cost • Annualized savings by avoiding or delaying upgrades, not applying EHPs • 0.5 FTE* • 0.33 FTEs* • 50% savings on $446,008 Paying $446,008 in Annual Maintenance Fees $223,004 $160,000 $75,000 $50,000 $508,004 • Total savings annually Upgrades Customization Support Maintenance Resources
- 16. Property of Rimini Street ©2013 | Proprietary and Confidential16 $11B UNIFIED ENERGY COMPANY • This company will save more than 1.7 times over their Oracle annual support fees each year by switching to Rimini Street Support • The example below highlights how this company will save $3,298,000 EACH AND EVERY YEAR for the next 10 years for a Total Maintenance Savings of $32,980,000 * $150,000 full loaded FTE cost • Annualized savings by avoiding or delaying upgrades • 2.3 FTEs* • 3.3 FTEs* • 50% savings on $1,896,000 Paying $1,896,000 in Annual Maintenance Fees $948,000 $1,500,000 $350,000 $500,000 $3,298,000 • Total savings annually Upgrades Customization Support Maintenance Resources
- 17. Property of Rimini Street ©2013 | Proprietary and Confidential17 $12B FINANCIAL SERVICES COMPANY • This company will save 2.5 times their Oracle annual support fees each year by switching to Rimini Street Support • The example below highlights how this company will save $862,262 EACH AND EVERY YEAR for the next 10 years for a Total Maintenance Savings of $8,622,620 * $150,000 full loaded FTE cost • Annualized savings by avoiding or delaying upgrades, not applying EHPs • 0.5 FTE* • 2.0 FTEs* • 50% savings on $174,524 Paying $174,524 in Annual Maintenance Fees $87,262 $400,000 $75,000 $300,000 $862,262 • Total savings annually Upgrades Customization Support Maintenance Resources
- 18. Property of Rimini Street ©2013 | Proprietary and Confidential18 Now, Let’s draw a winner for the Kindle Reader! For more info, visit Rimini Street at the Exhibit Showcase: Discuss your challenges, strategies, and objectives Learn more about Rimini Street‟s services Enter our drawing to win the Bose Noise-Cancelling Headphones! Questions and Answers Contact Information: Frank Reneke freneke@riministreet.com Tel: 925-357-7028 www.riministreet.com Toll Free: 888-870-9692
- 19. QuestDirect.org APRIL 7-11, 2014 Sands Expo and Convention Center Las Vegas, Nevada QuestDirect.org/COLLABORATE COLLABORATE 14- Quest Forum is THE source for PeopleSoft roadmaps & news. It matters where you register! All PeopleSoft education and events run through Quest
Notes de l'éditeur
- That Total Cost of Maintenance contributes to what is really the big problem that has to be addressed by IT and Finance executives. A very recent Gartner report states that 80% of IT budgets go to “keeping the lights on,” leaving only 20% for new initiatives.There are cuts happening everywhere in our lives including the Federal Government and yet the HW and SW companies didn’t get the memo.The overall size of the pie is shrinking, but your maintenance costs are fixed, so new initiatives and people are getting cutThe problem is that if you don’t do anything about this, you won’t be helping the company innovate, drive competitive advantage and meet the company goals…
- Now let’s talk about how your enterprise software world has changed. Ray hit on a few of these points in his presentation but I think it’s important to summarize how the current state of ERP has changed. Full-featured Stable Software-Today’s software is mature stable and more than meets your needs-Every possible feature and function built in-Back in the 90s when I was at PS, needed next release just to complete biz processes and get sw that actually worked-Today, incremental releases add very little value, in fact, most customers are over-softwaredCostly Forced upgrades-Mature software and low value upgrades, clients don’t want or need to upgrade-vendor support timelines force customers to upgrade to stay supported, but there is no ROI-These forced upgrades are huge cost, distraction, resource strain and risk – and don’t add valueLack of Innovation-One of the reasons upgrades don’t add value is that Oracle and SAP are not innovating at the pace we would all like, they are at the trailing edge of the innovation curve-Innovation is coming from smaller, more agile vendors providing SaaS, mobile, BI, and other innovations-Look at SRM and eProcurement, if you had waited for ERP providers, you would have waited ten years for a viable solution, or you could have saved millions a year with a solution like AribaExpensive, Low-value maintenance fees-Despite not getting value from upgrades or innovation, the ERP model is to keep paying very expensive maintenance fees-92% margins, huge profits for Oracle and SAP, but little value in return-Anything new is often packaged into a module that you have to license anyway!Service Dissatisfaction-This is why a majority of ERP customers are dissatisfied with the service and value of vendor annual support-Expensive, but I’m not getting any competitive advantage or ROI-When sw was immature, needed to get continuous bug fixes… but in today’s stable mature environment I don’t see the value for my spend.Service Irrelevance-And to take it a step further, Oracle and SAP support is really IRRELEVANT for today’s mature enterprise software-65% of all issues we receive, and 85% of P1 issues, are related to customized code – Code the vendor doesn’t even support!So if you compare the enterprise software world today with when you originally licensed your software, the world is dramatically different. Yet the business model and software support models from Oracle and SAP haven’t changed in any meaningful way – except that they have raised prices to a full 22% of your license fees.
- What’s worse, is that Oracle and SAP support don’t even address the majority of issues customer like you have with their ERP systems.This may be the most important slide in the whole deck and will certainly raise some eyebrows out there. A full 85% of all Priority 1 Production Down problems occur on custom code and Oracle and SAP do NOT support custom code.Those that think they have a “great insurance policy” with Oracle and SAP support should dig deeper and see what they really have.
- So let’s sum up what is really needed in today’s support models. What you need, what the industry needs, is a new approach to how we support and maintain our ERP systems, and how we manage our ERP roadmap and strategy. We need to shift from vendor centric to client-centric We need to have fair profit margins We need a model that supports custom code We need Engineers with 10 – 20 years experience at client sites and not just “book trained low-level resources” We need to be able to upgrade on timelines that make sense for our businesses We need to realize that innovation comes from a multitude of different vendors and that we must have the flexibility to make our own choices.With that, let’s open it up for questions and thank you all very much for attending our Webinar today. We hope the information was useful.
- Your annual maintenance fee savings of 50% are just the “tip of the iceberg” in savings gained under Rimini Street Support. In fact, your annual maintenance fee savings are far outweighed by the additional savings that are hidden under the water line. We call this your Total Maintenance Savings.If you are paying $2M in maintenance to SAP or Oracle today, your immediate Annual Maintenance Fee savings with Rimini Street is $1M. That $1M is the 33% of your Total Maintenance Savings above the water line. But for every dollar of savings in annual support fees, there is another 2 dollars of savings in other support and maintenance related costs. All combined, the rule of thumb is that your Total Maintenance Savings is 1.5 times your vendor annual maintenance spend. Simply take your annual maintenance spend and multiply it by 1.5 to determine your Total Maintenance Savings on an annual basis. In this case, if you are spending $2M on vendor support fees, by moving to Rimini Street you can save 1.5 times that, or $3M annually! That is $30M of savings over 10 years! [NOTE – the exact value of the multiplier in the example above is 1.52 based on our model. It can be calculated exactly by taking 1 divided by .33 divided by 2. The .33 is the % of annual support fee savings of the overall savings and the 2 takes into account that support fee savings are half the vendor support fees being paid by the licensee]Let’s look at the additional savings categories above and beyond cutting your annual support fees in half:Upgrades - The cost avoidance of forced upgrades just to stay supported when the vendor support windows end or without a sound ROI. These upgrades can end up costing millions of dollars. For a company paying $2M in annual support fees, we estimate you will save about $818,182 annually by avoiding upgrades. But the savings could be much more than that. For example, one of our clients was paying the vendor $3M in annual support fees, which meant we saved them $1.5M in annual support fees, but they were also able to avoid a costly $19M upgrade.And when vendors move to ongoing enhancement packs (such as SAP) in an attempt to hide the cost of upgrades, all they are doing is spreading the cost of one large upgrade across several years like peanut butter.Customization Support – The cost avoidance of having in house or external resources fix customizations that break. The majority of the issues in today’s mature enterprise software are NOT in the vanilla code delivered by the software vendor. Most issues are in the code you have customized to fit your unique business requirements. In fact, 65% of the issues we receive from clients at Rimini Street are related to custom code – and 85% of the P1’s!A company paying $2M annually in support fees can expect to save about $666,667 per year by moving their customization support to Rimini Street. [Note – this is 4.44 FTEs per year at a $150K fully loaded rate].Maintenance Resources - The cost avoidance of additional resources and headcount required to deal with the extra burden and inefficiencies of vendor support, including, for example:Bundles of hundreds of fixes (Support packs) – Rimini Street provides just the fix you need while the vendor gives you bundles of hundreds of fixes that you have to deploy just to get the one you want. This means you have to review, assess, regression test and manage hundreds of irrelevant fixes when you just needed the one that might fix your problem. Unneeded tax and reg updates– Rimini Street provides tailored tax and regulatory updates just for the scope of your business while the vendor provides large updates that include all jurisdictions (most unrelated to your business), putting the burden on your team to determine what you need to deploySelf-service support– With Rimini Street, when you have an issue all you do is pick up the phone and call your PSE who then does all the work to assess, diagnose and resolve your issue. With the vendor, most companies employ internal support team members whose only job is to hunt for potential resolutions to issues in the vendor’s support portal or online forums, drastically increasing not just the cost but also the time involved in break / fix maintenance.Issue justification – With Rimini Street, when you have an issue, we fix it – no questions asked. With the vendor, you often have to prove your issue is real, are forced to replicate it in a vanilla environment, or force your way through several escalations to ever talk with an actual engineer.It’s “fixed in the next release” – Again, at Rimini Street, we fix your issues in YOUR SOFTWARE VERSION no questions asked. With the vendor, the answer is frequently it’s “fixed in the next release” or it was designed that way. You end up having to fix these issues yourself.A company paying $2M in support fees can expect to save about $545,454 per year by avoiding all these vendor support inefficiencies and overhead. [Note – this is 3.64 FTEs per year at a $150K fully loaded rate].
- Real or not there is this perception that Oracle will one day force clients to move to Fusion Applications. The conflict between Application Unlimited and Fusion Applications will be resolved as time runs out and Oracle needs to compete with competitors. I think the key is Oracle has a very definitive roadmap, they have become a huge software and hardware company and they want their customers to use their products and tools almost to exclusivity.Customers are rationalizing their choices and prioritizing. The technologies that were a priority just 5 years ago have dramatically changed. Mobile and Cloud computing back then were just barely on the radar and today along with BI and Analytics are part of every CIO’s top 3 priorities in 2013 according to analysts.As a long time consulting ERP implementation Partner with Oracle and others, I see the basic issue is that the cost of maintenance and the cost upgrading ERP has disenchanted many. High maintenance costs, difficult to upgrade applications that are heavily customized and diminishing vendor enhancements have become the biggest obstacles in mature ERP installations especially with large global companies. That is why 73% of customers surveyed by OAUG admit that the main reason they do an upgrade is “End of Support” rather than innovation and new business processes. Often all budgeted money has been spent by the time most ERP implementations go live and the continued additional cost of maintenance and testing of upgrades is additional debt with no ROI that over the long term hurts and or kills the ability to innovate.On top of that Fusion is just not ready. It needs time to mature and Oracle is continuing to invest but it still may be 5 years or more until Fusion has all the features of today’s mature ERP software. New software license in the last quarter was down 2% from the prior year and Cloud revenues were down 1% which is striking compared to Salesforce which saw a 28% increase during the same period.The conflict between old (Apps Unlimited) and new (Fusion) at Oracle has in essence has also fueled Oracle acquisition strategy. They have snapped up smaller companies like Selectminds, Taleo, RightNow, Collective Intellect and Vitrue among others. Analysts expect these companies to serve as the growth engines for Oracle going forward. Expect Oracle Sales to push these companies on the installed base to drive growth. Oracle is essentially buying Innovation (best of breed) and selling it back as coexistence options to Apps Unlimited customers.
- Foundation of today’s discussionAdmire Paul and the Forrester team-Relatively controversial to be transparentAll attendees will receive link to report in post webinar email-You must read this report and understand current state and potential future actionsToday Paul will share some of what is in the report and add even more color in his comments and in the Q&A.NOW TURN OVER TO PAUL AFTER POLL
- Let us consider the 3 basic choices that face all of us today:1. We can Stay with Current2. We can Upgrade3. Or we can Transition to new applicationsStaying with our current applications is strategy that increases our return investment. I think most of us would agree based on the OAUG survey results that staying with current is our preferred option.Upgrading is a strategy that is most often employed to extend support an additional 3 to five years. The problem with upgrading is that it is a never ending treadmill. Transitioning to New is easier said than done. Today the one to one functionality between Apps Unlimited and Fusion does not exist. This is why Oracle is pushing coexistence so strongly in my opinion. They know you cannot move your full HCM, ERP or CRM to Fusion today so instead they want you to buy incremental Fusion applications that offer new functionality but have to be purchased as new license.The Oracle’s Cloud Services business is essentially an edge strategy allowing customers to interface with things like Select Minds, Taleo, RightNow, and Fusion itself thru Customer and Accounting Hubs.All of this has created what I call the Fusion Storm.Oracle needs customers to keep paying full maintenance and license new edge products to grow since ERP and Fusion license revenue is basically flat as Paul described earlier.
- Deferring upgrades for now, saving your maintenance fees and upgrade costs, and running your apps with third-party support gives you the funds and the flexibility to select the right next platform for you, once they are built, deployed and tested. And along the way, you can use a portion of your savings to deploy innovative solutions for competitive advantage.
- Deferring upgrades for now, saving your maintenance fees and upgrade costs, and running your apps with third-party support gives you the funds and the flexibility to select the right next platform for you, once they are built, deployed and tested. And along the way, you can use a portion of your savings to deploy innovative solutions for competitive advantage.