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7/17/2009
00:45 AM
Bob Evans
Bob Evans
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Rimini Street Taking $200M Out Of Oracle And SAP Pockets

Continuing to snatch Oracle and now SAP customers with half-price maintenance and support contracts, Rimini Street is morphing from gadfly to high-flier as its annual run rate approaches $200 million and it accepts a $10 million private-equity investment to fuel global expansion. Is it too late for the big boys to pull out the fly-swatter?

Continuing to snatch Oracle and now SAP customers with half-price maintenance and support contracts, Rimini Street is morphing from gadfly to high-flier as its annual run rate approaches $200 million and it accepts a $10 million private-equity investment to fuel global expansion. Is it too late for the big boys to pull out the fly-swatter?Privately held Rimini Street, founded by a former PeopleSoft sales executive who sold a similar third-party-support company to SAP four years ago, is not required to announce precise sales and earnings, and trying to deciphering the details the company has released about its size requires a bit of guesswork.

But even with a fairly broad margin of error, a conservative estimate of the company's growth indicates that it is gaining undeniable traction among very large companies that have decided they are no longer getting acceptable value from Oracle and SAP in return for the 22% annual fees those companies charge.

Rimini's promise to customers and prospects is that it will beat those big-company fees by 50% and deliver an equivalent or better quality of service. And while even an aggressive estimate of Rimini's revenue would at this point be not much more than a rounding error for either Oracle or SAP, the growth rates that the company is claiming and the client names it is dropping are clear indications that major changes are looming within the enterprise-applications market.

Let me share how I came up with the $200 million run rate for Rimini: six months ago, the company said that for calendar 2008, its "sales bookings" for the year totaled $86 million. And in that same release from six months ago, the company said its "sales bookings" for 2008 more than quadrupled over 2007.

So let's put the 2007 figure at $20 million, and break out quarterly figures this way: $2M, $4M, $6M, and $8M - that gives a total figure for 2007 of $20 million. Using the quadruple multiple that appears frequently in Rimini's descriptions of its growth, and those 2007 quarterly figures jump to $8M, $16M, $24M, and $32M for $80M in 2008 "sales bookings."

In its statement this week, the company said this about its first-half 2009 performance versus the first half of 2008: "For the first half of 2009, Rimini Street's sales bookings more than quadrupled compared to the first-half of 2008 and revenue and invoicing approximately tripled for the same period." So using my estimated figures in the paragraph above, "sales bookings" in the first half of 2008 probably totaled $24 million, and if we quadruple that as stated, then first-half 2009 "sales bookings" come out at $96 million. And since the company said the numbers went up by more than a factor of 4, we'll round up to $100 million for the first half of the year.

Double that for the year -- and that's a conservative approach that would assume second-half growth of less than 100%, compared to Rimini's current growth rate of 300% -- and we get a run rate of $200 million.

My point in walking through that arithmetic exercise is to show that the power of big numbers is kicking in here very quickly and very dramatically. For example, if Rimini is somehow able to sustain that quadrupling effect in the second half of this year - and I realize that's a huge if - then that would mean quadrupling my estimate of $56 million for the second half of 2008, which would come out to $224 million for the second half of this year and a total for the year of about $325 million.

And all of a sudden we're no longer talking about a little company anymore. Which is surely one of the features that attracted private-equity firm Adams Street Partners to invest $10 million in Rimini, which the company said it will use to "accelerate international growth in order to meet fast-growing global demand for its third-party support services in Europe, Asia, and Latin America."

And here's what one very happy customer had to say about Rimini's performance:

"Rimini Street offers a proven annual support program at a savings of at least 50% in annual support fees that all organizations should consider in their strategic IT planning," said Greg Clore, Vice President, Information Technology, Dave & Buster's. "Dave & Buster's trusts and relies on Rimini Street to provide support for our mission-critical PeopleSoft systems. Rimini Street has delivered a strong annual support value, including ultra-responsive service, significant annual cost savings, and the ability for Dave & Buster's to run our current releases through at least the year 2020 without any costly required upgrades."

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