Analysis of Rimini Street’s Presentation on ERP Support

Executive Summary

  • Rimini Street’s Paper
  • Analysis of Rimini Street’s Quotations

Introduction

Rimini Street wrote the article 10 Telltale Signs of that it is Time to Change in Your ERP Strategy. This is a document that focuses on the history of ERP and ERP support. It seemed worthy of analysis.

Rimini Street Quotes

“In the beginning, your vendor delivered great software and valuable support that helped you troubleshoot issues and optimize your systems. But over time, that model changed. The support partnership between you and your vendor has eroded and software improvements have all but disappeared.”

Brightwork Research & Analysis covered this in a previous article titled What To Do About SAP’s Declining Support. We don’t cover Oracle very much, so we were unaware of the decline in support quality from Oracle.

“89% of the average IT budget is dedicated to keeping the lights on, leaving only 11% for innovative projects*”

This has been known for some time. What SAP and their consulting partners, in particular, have excelled at doing is maximizing their take of the IT budget or the larger companies. This is covered in the article How Enterprise Software’s ROI Was Parasitized by Vendors and Consulting Firms.

“In ERP’s early days, annual support was typically 15% of the original license cost. Today, support costs have risen to a standard 22% — a whopping 47% increase over the years. And it’s not because Oracle and SAP have been investing in making support more responsive to customers’ needs. It’s because vendors net up to a 90% profit margin on support revenue, accounting for roughly half their revenue streams, making investors very happy.”

This is consistent with what amounts to changing the terms of the software sale. If the software was originally sold under the concept of a 15% yearly support fee, then that percentage should continue. No doubt one of the logic used by Oracle and SAP is that on software purchased many years back, its support, as it is based upon the list license cost. However, this argument is undercut by the fact that most SAP customers have been purchasing other SAP applications as time has passed. Furthermore, Oracle and SAP have both followed a consistent approach of harvesting their existing customers. Oracle does this with highly punitive audits. SAP has opted instead for indirect access to force companies into purchasing more of their software.

“Before you know it, one small problem has morphed into a big project with regression testing and downtime that costs a lot of money, time and resources. When you get back in touch with support, you’re unlikely to get access to experienced engineers unless you navigate a maze of escalations.”

I have faced this issue myself. Poor quality support undermines the system. It is curious that so much money in IT is spent on system implementations hiring highly expensive and wasteful firms like Deloitte, Accenture or IBM, but when it comes to support, there is often a desire to reduce the support as much as possible.

“Most ERP implementations are robust and stable. Without compelling new functionality in the pipeline, many enterprises prefer to continue running the current system.”

In the case of SAP, they have tried to alter this truth by proposing that their new ERP system, S/4HANA has a great deal of innovation. Roughly 93% of S/4HANA is simply ECC (the previous version of S/4HANA).

And SAP customers have lost functionality with S/4HANA that came from ECC. SAP has also invalidated the agreement with customers that all new versions of purchased software would be included in the support price. SAP has decided to charge for S/4HANA even for customers that already are running ECC. This is covered in the following article Why SAP S/4HANA Should be Free.

“72% of SAP licensees believe their current release meets business needs*”

This figure is quite interesting. But it may even underestimate the actual benefit of upgrading for customers. This is because many of the business needs of the customer are not in the next release of their ERP system. There are always areas of functionality that the customer would like that is not contained in the ERP system.

“The cost of an upgrade can easily exceed $1 million. And more than 56% of Oracle ERP upgrades take nine months or more.* Upgrades also pose significant risks. Licensees are concerned about testing, staff limitations, maintaining customizations and the possibility of downtime.”

This was one of the most important areas of ERP that Rimini Street along with Nucleus Research highlighted. It was surprising to me when I read their coverage of the topic because:

  • a) it was never an area in which I specialized, and
  • b) it seems not to be mentioned on projects. Instead, upgrades are treated as necessary and responsible.

90% of ERP systems are customized*

* 85% of Priority 1 issues are custom-code related* 65% of all issues are custom-code related*

* 65% of all issues are custom-code related*

This was surprising. In my consulting experience, I don’t recall seeing the customizations cause that high a percentage of the issues. However, following up issues was not mainly what I have done.

“Gradual rollouts of cloud versions of Oracle Fusion and new SAP S/4HANA updates have triggered lukewarm interest from customers. Acquisitions of cloud vendors, such as Oracle’s buy of NetSuite and SAP’s purchase of Concur, have introduced more questions about ERP roadmaps.”

That is certainly true. Extremely few customers are live on S/4HANA. Oracle Fusion’s lack of adoption is renown even for those that do not specialize in following Oracle.

Conclusion

This is a quite interesting presentation from Rimini Street. Quite educational actually.

ERP Contact Form

  • Want Honest Information about ERP?

    It is difficult for most companies to make improvements in ERP without outside advice. And it is close to impossible to get honest ERP advice from large consulting companies. We offer remote unbiased multi-dimension ERP support.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, tell us your question below.

Brightwork Explorer for ERP Parameters

How to Tune ERP Systems

ERP applications require MRP parameters to be optimized externally to the ERP system. Having analyzed many ERP systems, we developed the Brightwork MRP & S&OP Explorer. It is free to access until it sees “serious usage” and is free for students and academics. Click the image to find out more.

References

The Real Story on ERP

ERPThe Real Story Behind ERP: Separating Fiction From Reality

How This Book is Structured

This book combines a meta-analysis of all of the academic research on the benefits of ERP, coupled with on project experience.

ERP has had a remarkable impact on most companies that implemented it. Unplanned expenses for customization, failed implementations, integration, and applications to meet the business requirements that ERP could not–have added up to a higher Total Cost of Ownership for ERP were all unexpected, and account control, on the part of ERP vendors — is now a significant issue affecting IT performance.

Break the Bank for ERP?

Many companies that have broken the bank to implement ERP projects have seen their KPIs go down— but the question is why this is the case. Major consulting companies are some of the largest promoters of ERP systems, but given the massive profits they make on ERP implementations — can they be trusted to provide the real story on ERP? Probably not, however, written by the Managing Editor of SCM Focus, Shaun Snapp — an author with many years of experience with ERP system. A supply chain software expert and well known for providing authentic information on the topics he covers, you can trust this book to provide all the detail that no consulting firm will.

By reading this book you will:

  • Examine the high failure rates of ERP implementations.
  • Demystify the convincing arguments ERP vendors use to sell ERP.
  • See how ERP vendors take control of client accounts with ERP.
  • Understand why single-instance ERP is not typically feasible.
  • Calculate the total cost of ownership and return on investment for your ERP implementation.
  • Understand the alternatives to ERP.

Chapters

  • Chapter 1: Introduction to ERP Software
  • Chapter 2: The History of ERP
  • Chapter 3: Logical Fallacies and the Logics Used to Sell ERP
  • Chapter 4: The Best Practice Logic for ERP
  • Chapter 5: The Integration Benefits Logic for ERP
  • Chapter 6: Analyzing The Logic Used to Sell ERP
  • Chapter 7: The High TCO and Low ROI of ERP
  • Chapter 8: ERP and the Problem with Institutional Decision Making
  • Chapter 9: How ERP Creates Redundant Systems
  • Chapter 10: How ERP Distracts Companies from Implementing Better Functionality
  • Chapter 11: Alternatives to ERP or Adjusting the Current ERP System
  • Chapter 12: Conclusion

https://www.riministreet.com/Documents/Collateral/Rimini-Street-ebook-10-Telltale-Signs-Change-ERP-Strategy.pdf

How Much Money Has Been Wasted on Oracle and SAP ERP

 What This Article Covers

  • Background on the Waste with Tier 1 ERP Systems
  • The Team Effort for Required for the Analytical Failure
  • Tips for Interpreting the Book

Introduction

In the book The Real Story Behind ERP: Separating Fact from Fiction, extensive research performed by SCM Focus is presented — and the conclusion is that ERP was never proven to improve either the operations or finance of any company. Furthermore, one after another prediction made by — particularly the Tier 1 ERP vendors never came true.

The uncovered story of how ERP software become the most popular category ever developed within enterprise software. This was done without any evidence that it could either pay back the enormous investment it required, could improve the return or efficiency of applications which were connected to it. Or even reduce the integration costs incurred by IT departments relates to a central problem in IT decision making, which is explained in the quotation from the book below:

  1. Accepting Simplistic Explanations: Companies tend to be easily influenced by oversimplified rationales or logics for following particular courses of action. This will repeatedly be shown in this chapter. If the executive decision-makers had known technology better, and if they had studied the history of both enterprise software sales methods there is no way that the simple logics that were so effective in selling ERP would have worked. Another way of looking at this is that it was simply all too easy.

The Team Effort for Required for the Analytical Failure

It was a team effort to make such poor decisions, and the research shows repeated unsubstantiated comments made by both IT analysts as well as consulting companies. The book chronicles evidence-free statements made by the most prestigious IT analysis, consulting firms and from enterprise software media. What is clear is that most of the entities which put out articles on enterprise software combine both a financial bias with an inability to perform original research — or even to review research that should not have been that difficult to find.

Tips for Interpreting the Book

The first step for readers — and it is a big step, is to review the evidence presented in the book to understand what transpired in an over 30-year misinformation program. Because ERP is now so ubiquitous, it is assumed that ERP is necessary — even if it does not provide any payoff. However, there are a large number of flaws in this common assumption. “ERP” is some things. First, it is a concept, which is defined by the book as the following:

“Conceptually, ERP is a combined set of modules that share a database and user interface, which supports multiple functions used by different business units.”

However, it is more than this idea and the following are just some of the aspects of ERP that are covered in the book.

  1. ERP as the Central System: ERP is also a philosophy that ERP should be the center of the IT system – when in reality it is simply another application.
  2. Functionality if of Secondary Importance: ERP takes as a foundational assumption that functionality is secondary in importance to integration — which was never true. In fact, the benefits of all software — enterprise or consumer — are what the application can do. Integration is a consideration, but it can never be the driver to what software to purchase. ERP vendors were not only able to get companies to implement common functionality which resided in the ERP application, but also in the standard feature in uncompetitive non-ERP solutions that they sold. ERP vendor, and their partners — the major consulting companies, are significantly responsible for the low efficiency of enterprise software as so much standard and low functioning software has been implemented by ERP vendors at so many companies.
  3. ERP as a Method of Account Control: ERP – as practiced by both Tier 1 and many Tier 2 vendors are connected to anti-competitive practices which are centered around account control. In the grand strategy of the Tier 1 ERP vendors, the ERP system serves as “the wedge.” Once the ERP vendor has sold the ERP system, the ERP vendor has both the established relationships and from there uses a variety of logical fallacies to take over as much of the IT business of the customers as possible. The eventual goal gobbles up as much footprint as possible and to turn the IT department into a passive and controlled entity which implements the software it tells it to.

Conclusion

The book includes specific examples of how ERP limits companies which are listed below.

  1. Case Study #1 of ERP Misuse: Managing the Bill of Materials/Recipe
  2. Case Study #2 of ERP Misuse: Disabling the Enterprise for Collaboration
  3. Case Study #3 of ERP Misuse: How ERP Undermines Internal/External Planning
  4. Case Study #4 of ERP Misuse: Intercompany Transfer

ERP Contact Form

  • Want Honest Information about ERP?

    It is difficult for most companies to make improvements in ERP without outside advice. And it is close to impossible to get honest ERP advice from large consulting companies. We offer remote unbiased multi-dimension ERP support.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, tell us your question below.

Brightwork Explorer for ERP Parameters

How to Tune ERP Systems

ERP applications require MRP parameters to be optimized externally to the ERP system. Having analyzed many ERP systems, we developed the Brightwork MRP & S&OP Explorer. It is free to access until it sees “serious usage” and is free for students and academics. Click the image to find out more.

References

The Real Story on ERP

ERPThe Real Story Behind ERP: Separating Fiction From Reality

How This Book is Structured

This book combines a meta-analysis of all of the academic research on the benefits of ERP, coupled with on project experience.

ERP has had a remarkable impact on most companies that implemented it. Unplanned expenses for customization, failed implementations, integration, and applications to meet the business requirements that ERP could not–have added up to a higher Total Cost of Ownership for ERP were all unexpected, and account control, on the part of ERP vendors — is now a significant issue affecting IT performance.

Break the Bank for ERP?

Many companies that have broken the bank to implement ERP projects have seen their KPIs go down— but the question is why this is the case. Major consulting companies are some of the largest promoters of ERP systems, but given the massive profits they make on ERP implementations — can they be trusted to provide the real story on ERP? Probably not, however, written by the Managing Editor of SCM Focus, Shaun Snapp — an author with many years of experience with ERP system. A supply chain software expert and well known for providing authentic information on the topics he covers, you can trust this book to provide all the detail that no consulting firm will.

By reading this book you will:

  • Examine the high failure rates of ERP implementations.
  • Demystify the convincing arguments ERP vendors use to sell ERP.
  • See how ERP vendors take control of client accounts with ERP.
  • Understand why single-instance ERP is not typically feasible.
  • Calculate the total cost of ownership and return on investment for your ERP implementation.
  • Understand the alternatives to ERP.

Chapters

  • Chapter 1: Introduction to ERP Software
  • Chapter 2: The History of ERP
  • Chapter 3: Logical Fallacies and the Logics Used to Sell ERP
  • Chapter 4: The Best Practice Logic for ERP
  • Chapter 5: The Integration Benefits Logic for ERP
  • Chapter 6: Analyzing The Logic Used to Sell ERP
  • Chapter 7: The High TCO and Low ROI of ERP
  • Chapter 8: ERP and the Problem with Institutional Decision Making
  • Chapter 9: How ERP Creates Redundant Systems
  • Chapter 10: How ERP Distracts Companies from Implementing Better Functionality
  • Chapter 11: Alternatives to ERP or Adjusting the Current ERP System
  • Chapter 12: Conclusion