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11/5/2004
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Third-Party Support Provides Alternative To ERP Vendors

TomorrowNow offers to maintain and support PeopleSoft ERP apps for half the price the software company charges.

Most businesses are relatively happy with the upgrades, support, and maintenance offered by their enterprise-resource-planning vendors. But for those who don't want to spend money on upgrades and new features, alternative support companies can provide a less-expensive option, according to a recent report from AMR Research on third-party ERP-support services. That poses a threat to enterprise applications vendors such as PeopleSoft Inc., who rely on upgrade and maintenance revenue.

The majority of businesses using ERP systems will stay with vendor support, AMR analyst Bill Swanton says, because it's the best way to get the latest features and ensure a smooth upgrade to new versions of the software. But some businesses that are happy with their current systems are looking for other options. That's especially true for PeopleSoft customers, who are unsure about the future of the company and its applications as Oracle continues to try to acquire the company.

"A lot of value that Oracle assigns to PeopleSoft has to do with its maintenance revenue stream, and [customers] fear that Oracle will not invest in extending the functionality of that product [beyond] the bare minimum necessary to keep the product running," Swanton says. "The threat here is that a lot fewer users might renew their maintenance and support" because they don't want new features or new versions of the applications.

One company looking to take advantage of that trend is TomorrowNow Inc., a third-party provider of support services for PeopleSoft products. President Seth Ravin says many PeopleSoft customers don't want to spend money to upgrade their current ERP applications. He says he can provide basic support and save those customers money.

ERP support contracts range from 15% to 22% of the license fee, but TomorrowNow offers its support services for about half of what PeopleSoft charges, Swanton says. TomorrowNow's services include bug fixes, problem solving, and regulatory and tax updates to ensure that payroll and human-resources applications stay current, Ravin says. He says TomorrowNow provides some of these updates faster than PeopleSoft and that he offers support contracts for as long as 10 years, compared with PeopleSoft's support contracts of four years or less.

The city of Atlanta turned to TomorrowNow after PeopleSoft discontinued extended support for the vendor's HRMS version 7.51 in July. "PeopleSoft was asking us to upgrade our current version to version 8.0, and we knew there was a huge cost associated with that," around $7 million, CIO Abe Kani says. "At the same time, we were pursuing a new ERP strategy and we did not feel that PeopleSoft was going to be part of the strategy."

Atlanta is looking to implement a fully integrated financial-management, human-resources, and customer-relationship-management system on a single platform from a single vendor. The city's current financial system runs on mainframe and doesn't interoperate well with other applications, Kani says. "We have decided to pursue a different vendor than PeopleSoft and we hope to achieve a completely integrated business process," he says. The city wants to combine all of its financial and HR information in a single repository and only have one vendor to deal with.

"TomorrowNow is providing us with almost the same level of support as PeopleSoft at a much reduced cost," Kani says. "They also guarantee that as long as we are on this version of PeopleSoft, they are not going to leave us in the cold. We've only been using them for a couple of months, but we are happy their services."

Third-party ERP support is in its infancy and is most useful to companies--or organizations like Atlanta--that have decided not to upgrade their systems, Swanton says. Ravin agrees, acknowledging that businesses that want to upgrade systems every couple of years aren't good candidates for TomorrowNow's service.

"We're the equivalent of a major medical plan; we provide all of our customers' basic needs," he says. "It's an alternative program and not necessarily better than PeopleSoft; it's just for customers who want to get more out of their IT investment and run [the same systems] longer."

TomorrowNow is one of the only companies offering third-party support for the PeopleSoft HRMS suite, Swanton says. But business-technology managers can find third-party companies for a variety of other applications, many of which are no longer supported by the original developers, he says. Swanton says there are also hundreds of freelance consultants supporting various legacy ERP systems.

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