Support Comes From The OutsideSupport Comes From The Outside
Some businesses turn to third-party support to manage enterprise applications, and they pay a lot less.
January 7, 2005
Third-party maintenance of enterprise applications is a potential growth area because the cost of maintenance through application suppliers is generally so high. That could be a problem for Oracle--if the trend takes off, the company might not realize all the gains it hoped for with its acquisition of PeopleSoft Inc.
But it's an opportunity for TomorrowNow Inc., which was founded by CEO Andrew Nelson, a former PeopleSoft Installation Services executive and manager of PeopleSoft Upgrade and Technology Consultants. The company, which has provided maintenance for PeopleSoft applications since 1998 and recently added support for J.D. Edwards apps to its roster, has 100 customers, including the city of Atlanta, Lockheed Martin, and Safeway.
Park Associates, operator of a 27-unit nursing-home chain, is a new customer of TomorrowNow. As of Jan. 1, Park Associates began getting support from TomorrowNow. IS director Jack Hughes says he was wary of the promises made by Oracle CEO Larry Ellison to continue to support PeopleSoft apps for the next 10 years.
For the past four years, Park Associates has been using PeopleSoft payroll, general-ledger, accounts-payable, purchasing, and asset-management applications, and it will upgrade them all to version 8 over the next 60 days. Park Associates' contract with TomorrowNow will overlap with a maintenance contract with PeopleSoft, which is paid up through Feb. 28. TomorrowNow isn't acting as an upgrade implementer, but it will help Hughes get the upgrades running the way Park Associates wants. "They know PeopleSoft applications inside and out. It seems like they're all a bunch of ex-PeopleSoft people," Hughes says.
Park Associates will save about half, or $100,000, on its existing maintenance bill through its agreement with the company, which promises to support version 8 applications for the next 10 years, Hughes says.
PeopleSoft charged 18% to 20% of the purchase price of PeopleSoft applications for ongoing maintenance, says TomorrowNow president Seth Ravin, former director of customer service and strategy at PeopleSoft. Hughes says his company was due to renegotiate its three-year maintenance agreement with PeopleSoft, and he expected the applications supplier to bump up the price on maintenance 25%.
According to Hughes, PeopleSoft says "their new customers are paying more for maintenance, so they want you to pay fair-market value," he says. "That's ludicrous, because we rely less and less on support the more familiar we get with the applications."
Park Associates was using its own skills to engineer reports the way its accountants and payroll departments wanted them. TomorrowNow says it will adjust existing PeopleSoft applications to meet changes in the tax code and reporting needs, a service that Hughes says his company found "very appealing." PeopleSoft version 8 applications will serve the company well for many years, he says, if not the full 10 years of TomorrowNow's support guarantee.
Another user of third-party technical support is Toni Faval-North, CIO of Pomeroy IT Solutions Inc., an IT-services firm with $850 million in revenue in 2004. The company, which has used PeopleSoft human-resources applications since 1997, decided during a downturn in 2002 to switch to TomorrowNow technical support. "We saved $120,000, or 70% less than what PeopleSoft was charging," Faval-North says.
Traffic on TomorrowNow's Web site jumped 300% in the days after Oracle acquired a controlling share of PeopleSoft stock, Ravin says. He adds that the privately held company, with about 35 employees, also has received 200 resumés of "primary support engineers, talent that we would normally have to search out," in the last several weeks.
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