The pros and cons of third-party software support

Oracle-SAP suit sparks discussion of going with a third party

The Virginia Farm Bureau has been using PeopleSoft Financials since 1993, and for most of that time the organization paid hefty support costs for what Farm Bureau officials considered to be limited service.

PeopleSoft, now owned by Oracle, didn’t support customized versions of its software, and support engineers were often hard to reach, says Tony Spears, the Farm Bureau’s financial systems administrator.

So like many organizations, the Farm Bureau decided late last year to switch to third-party support offered by Rimini Street, and its support costs were slashed in half.

“We just couldn’t really justify the cost associated with [support from PeopleSoft],” Spears says.

Third-party support was put under the spotlight last month when Oracle accused rival SAP and its TomorrowNow subsidiary of stealing proprietary information in the process of providing third-party maintenance and support to customers of Oracle applications.

Some analysts have seen the lawsuit as a defense against SAP undercutting a major revenue stream by offering cheap support. But Oracle has done the same by offering low-cost maintenance and support to customers of Red Hat Linux.

Forrester Research analyst Ray Wang says he hopes third-party maintenance remains a viable option for customers, because many simply don’t need the expensive service offered by software vendors. The cost of maintenance from a software vendor is usually about 20% of the cost of software licenses, while third-party vendors offer support for half that price, Wang says.

Not everyone should use third-party support, despite the cost savings, he notes. Going with third-party vendors prevents you from getting the latest releases, security updates or patches, he says. But if your business needs only minimal changes or updates, if you have a subsidiary planning to reduce software use, or if you’ve decided not to get the latest upgraded version of an application, third-party is often a good choice.

“It goes back to what kind of business are you, what kind of stage are you in,” Wang says.

Software vendors often don’t provide indefinite support, either. You might be limited to eight years of support, and have to pay extra money in the final years, he says. “In some cases, the product is so old the company [that made it] has gone bankrupt,” he says.

Third parties can't do it all

Not every product can be supported effectively by a third party, says Steve Striebel, co-owner and vice president of sales for third-party vendor Versytec, which supports only one line of products: Oracle's JD Edwards World.

“From a support standpoint, if you don’t have access to the source code … it’s really hard to fix bugs and fix specific problems,” Striebel says. “JDE World is written in such a way that first of all we have access to all the critical source code we need. Second of all, you can make line-item changes in the code to fix a bug, to make regulatory updates and things like that.”

Striebel says he thinks TomorrowNow overextended itself by providing support for Oracle products that could not be maintained effectively by a third party, leading to the company apparently accessing proprietary information it didn’t have a right to see.

Spears of the Virginia Farm Bureau, which uses PeopleSoft Financials 8.0 for accounts payable, asset management and the organization’s general ledger, says Rimini Street provides the group with a contact person who can be reached at home, work, via cell phone and e-mail. Rimini has also within its own computer center recreated the Farm Bureau’s environment, including the PeopleSoft application, data and database, so engineers can easily walk Farm Bureau employees through software fixes.

When the Farm Bureau got support directly from PeopleSoft, it was sometimes provided as a service bundle that required installation of previous bundles, which Spears says was time-consuming and annoying because the group just wanted a single fix for whatever problem it was experiencing.

“When you actually need a fix, [Rimini] supplies you with the fix. They don’t supply you with a bundle that requires you to have prerequisites installed,” he says.

Another advantage is that Rimini supports customizations, changes the Farm Bureau has made on its own to the PeopleSoft application.

“I would recommend [third-party maintenance and support] to anyone that’s on a legacy version, if you will, who may not plan on upgrading and tends to use the applications they have for a while,” Spears says. “I don’t know if I would recommend it to someone who’s actually looking to do an upgrade.”

The Virginia Farm Bureau has been using Version 8.0 for several years and has no plans to upgrade, which made using a third party a good option, he says.

Third-party vendors are able to offer maintenance at cheaper prices because they don’t need large profit margins to support research and development, says Seth Ravin, the CEO of Rimini. Customers take on some risk because there are pieces of software that only the vendor has the source code for, he notes. But they can save hundreds of thousands of dollars, sometimes millions, over several years, he says.

“We offer at half the price what we consider a better support model,” Ravin says. “We cover customizations the same as we do Oracle’s vanilla code.”

Beekley Corp., which makes skin markers used during medical diagnostic imaging tests, began using Rimini's services early last year to support the CRM application Siebel Sales, another product that’s part of the Oracle's collection now.

Beekley actually dropped Siebel support well before it started with Rimini. In the interval, Beekley hired various vendors for individual jobs.

“The service we were getting from [Siebel] was not really that great,” says systems administrator Geris Papajani. “Basically every time something would be a problem we’d try to open a ticket and it would be forever before we would get an answer, and the answers [often] were not correct.”

Siebel support cost about 40% more than Rimini’s, according to Papajani. Beekley is considering upgrading to the latest version of Siebel Sales, but it will probably be too expensive, he says. Not having access to updates and patches hasn’t caused any major problems so far, he notes. Rimini has provided quick and responsive customer service, he says.

“That’s one of the things we have given up on, we cannot get any patches and updates,” Papajani says. “When we stopped the support with Siebel, we took the latest version we were entitled to and we never really updated that version either.”

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