Down To Business: Oracle Suit Casts Shadow On Rimini Gains
Alternative provider of software support services gaining enterprise customers, despite Oracle suit's chilling effect.
Rimini Street has news for those who may be writing off the company in the wake of Oracle's high-profile lawsuit against it: We're still making noise, even if the suit is slowing down our third-party application support business.
Rimini, a privately held provider of discount support services for Oracle and SAP applications, reported on July 16 that its revenue nearly doubled in the first half compared with the year-ago half, despite the chilling effect of the Oracle suit, filed in January, charging Rimini with stealing Oracle's software and intellectual property.
However, Rimini's revenue for the full year will come in only about 50% ahead of last year's $18 million, says David Rowe, senior VP of global marketing and alliances. Rowe says potential customers "pushed" about 15 deals in each of the first and second quarters as they assess the Oracle situation.
Nonetheless, Rimini reported that 98% of its clients due to renew their contracts in the second quarter did so, the highest quarterly renewal rate in the company's five-year history. Rimini says it landed 40 new contracts for Oracle (including PeopleSoft, Siebel, and JD Edwards) and SAP application support in the first half. It now counts more than 300 customers, including 11 of the Fortune 100 and 23 of the Fortune 500 -- AT&T, Union Pacific, Winn Dixie Stores, YRC Worldwide, Mutual Of Omaha, PepsiAmericas, and Dick's Sporting Goods among them. Rimini's sales booking backlog (the deferred value of signed contracts) stands at about $182 million as of the end of the second quarter, Rowe says.
Rimini isn't laying low. The company filed a counter suit against Oracle in late March, charging it with unfair competition, trade libel, and other transgressions. For the legal battle with Oracle, which Rimini expects to drag on for two-and-a-half years, it's marshaling an A team of lawyers, including Big Tobacco defenders Shook, Hardy & Bacon.
Rimini had been saving up for a likely Oracle suit for the past five years, Rowe says, given Rimini founder Seth Ravin's experience with another discount provider of Oracle support services, TomorrowNow. After SAP acquired TomorrowNow in 2005 (at which time Ravin left that company), Oracle brought a similar suit against SAP and its new unit, causing SAP to eventually shutter TomorrowNow in October 2008. That case is expected to go to trial in November.
In its suit against Rimini, Oracle charges the company with "massive theft of Oracle's software and related support materials." It alleges that Rimini used "robots" to automate the process of logging into Oracle's password-protected technical support Web sites "using a customer credential," then downloading software and support materials "in excess of the customer's authorization under its license agreement."
For its part, Rimini says its business practices are substantially different from TomorrowNow's, so the two Oracle suits shouldn't be intermingled. In its court filing, Rimini says it has implemented "extraordinary process and procedures to assure the proper use of Oracle's intellectual property," saying it performs a "unique download" of Oracle software and support materials "on behalf of each client that authorizes and requests such service." Rimini says it "maintains downloaded materials only on behalf of the client for whom the download was performed." Furthermore, Rimini says that each of its clients is assigned a separate data "silo" for its Oracle software and support materials. Rimini also claims that its practices are at least as rigorous as those of AT&T, Accenture, and other mainstream companies that host Oracle software.
The fact that Rimini continues to gain customers in the face of the uncertainty that Oracle's suit creates underscores the fact that there's pent-up demand for third-party application support services, which are at least 50% lower, Rimini claims, than the high-margin maintenance fees charged by Oracle and SAP. If its business practices are found to be illegal, Rimini likely will pay a substantial fine, change its practices, and continue to bang away at Oracle (and SAP).
But if Rimini wins, the courts will have validated the market for alternative enterprise software support. Rowe maintains that big league players like Infosys and Wipro, and perhaps even IBM and Accenture, are just waiting to break into this market once the courts define what is and isn't kosher. As Rowe says, should Rimini win, the market FUD is gone. Still, the big IT service providers would still have to decide whether they want to undercut a major partner (Oracle and/or SAP) whose ERP and CRM deployments remain a major source of their consulting revenue and profit.
There's one thing Oracle and Rimini Street agree on: Rimini's 180 employees and $18 million in fiscal 2009 revenue represent a rounding error relative to Oracle's 105,000 people and $27 billion. Oracle and SAP will continue to flourish irrespective of the suit against Rimini, but their decades-old software support model will be subject to mounting pressure.