News Analysis: Too Early to Call the Death of Third Party Maintenance

Problems at Tomorrow Now unfairly cloud the market
Recent announcements about a management change of control at Tomorrow Now and letters to clients indicating a change in service agreements (we've been told that both sides could have a 60 day window to cancel contracts in the new agreeemnts) could be perceived as a death knoll for 3rd party maintenance. However, the trends for third party maintenance look good because:

  • Value for maintenance fees still too low. Despite efforts by the major vendors to improve customer satisfaction, response times, and upgrade benefits, most customers continue to believe that they are not receiving the 2x to 2.5x they are paying in license fees over a 10 year period.
  • Customers seek options. Third party maintenance, which halves the cost of maintenance, frees up money for new projects and other key IT initiatives. Customers who may have gone to Tomorrow Now look to alternatives. Rimini Street founded by Seth Ravin , a TomorrowNow cofounder, is one vendor who has grown its base to 50 customers and a beneficiary of this trend.
  • Third party provider market may emerge from China. Chinese IT vendors, not beholden to SAP or Oracle the way the Indian SI's are, have an opportunity to provide this capability and provide some relief to the market. As the Chinese players like Augmentum, Achievo, Neusoft, Worksoft build their outsourcing capabilities, they will be best positioned to provide 3rd party maintenance. For them to succeed, they must do this before they become enticed by Oracle and SAP.

The bottom line for end users
Despite competitive and market pressures from Oracle and SAP, this issue remains a huge pain point for customers. Vendors for too long have milked the maintenance revenue to juice quarterly profits at the expense of customers. Expect new IT players to emerge and take this space and free companies from the shackles of vendor imposed policies while delivering on the true promise of "perpetual" licenses.

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved