Enterprise System Spectator blog: ERP and enterprise system vendor evaluation, selection, and implementation.

The Enterprise System Spectator

Friday, October 27, 2006

TomorrowNow a threat to Oracle's maintenance business?

I conducted a phone interview last week with Andrew Nelson, founder and CEO of TomorrowNow, a third-party maintenance support provider for Oracle's PeopleSoft, J.D. Edwards, and Siebel products. I've mentioned TomorrowNow in the past, but I was interested in how its business has been progressing in the year and a half since it was acquired by SAP.

TomorrowNow has not yet announced its third-quarter results, but Nelson indicated a major increase in new customers: over 200 today, with 60% running PeopleSoft, 30% on JDE, and 10% with Siebel (its newest support offering). The firm plans to offer support for Baan (now Infor's ERP LN) beginning in January 2007, and has already signed up some customers for this offering. Over the past year, TomorrowNow has built out its worldwide support organization to Europe, Asia, and Australasia, in addition to its base in the U.S.

Target Market
Although TomorrowNow markets its services for all users of PeopleSoft, JDE, and Siebel, in my view there are a few key segments where the firm's offerings are most attractive. Nelson confirmed that one sweet spot is companies that are running SAP globally but still have instances of PeopleSoft, JDE, or Siebel. These firms, which may be looking to standardize on SAP, have little reason to stay on Oracle support contracts, and they welcome a lower-cost option that is backed by a major player such as SAP.

Another sweet spot is companies that have many modifications and do not intend to upgrade Oracle's Fusion product. In Nelson's view, such customers are paying maintenance fees to Oracle (at 22% of their license cost) to "prefund Fusion," even though they have no intention to upgrade to Fusion. Why shouldn't they save 50% or more on maintenance fees by going with TomorrowNow?

Furthermore, TomorrowNow actually supports the customer's modifications to source code as part of the support contract. Oracle's support agreements, in contrast, only provide support for original source code.

A Threat to Oracle?
The short answer is no, and yes. On the one hand, even with TomorrowNow's apparently prosperous third quarter, the firm's scale is still small. Its 200 customers are a drop in the bucket in terms of Oracle's installed base. Its 200 or so employees are a small workforce compared to the thousands in Oracle's support organization. The bulk of Oracle's customers are fearful of cutting off maintenance support from Oracle. As discussed earlier, TomorrowNow's greatest appeal is to customers that are either planning to migrate away from Oracle's products or have so highly modified their systems that they have no plans to upgrade.

On the other hand, third-party support providers play an important role in tipping the balance of power a little bit back toward the customer. It's no secret that the major software vendors derive a healthy part--sometimes even the bulk--of their revenue from maintenance agreements. It's something of a captive relationship. Once a customer has implemented a major enterprise system, it's not an easy matter to change systems. If the software vendor is the only source of support, the vendor can almost name its price and the customer has little choice except to "go naked" (drop support).

But the existence of third-party support organizations such as TomorrowNow gives customers a much-needed choice, which pulls the balance of power back toward the customer, even if the customer does not choose to go with the third party.

As the enterprise software market continues consolidation, there are many good packages that are being lost in the portfolios of the remaining vendors. Infor's collection of 50-plus systems is an extreme example. Vendors enjoy a continual revenue stream of maintenance dollars from the installed base of each of these systems. But if they get greedy, it's likely that we'll see many more providers such as TomorrowNow stepping in to deliver more value at a lower price.

Related posts
Rimini Street expands 3rd party maintenance for Oracle products
SAP to provide maintenance for PeopleSoft products
Oracle faces threat to Siebel maintenance fees

by Frank Scavo, 10/27/2006 07:33:00 PM | permalink | e-mail this!

 Reader Comments:

Post a Comment

Links to this post:


Powered by Blogger

(c) 2002-2016, Frank Scavo.

Independent analysis of issues and trends in enterprise applications software and the strengths, weaknesses, advantages, and disadvantages of the vendors that provide them.

About the Enterprise System Spectator.

Frank Scavo Send tips, rumors, gossip, and feedback to Frank Scavo, at .

I'm interested in hearing about best practices, lessons learned, horror stories, and case studies of success or failure.

Selecting a new enterprise system can be a difficult decision. My consulting firm, Strativa, offers assistance that is independent and unbiased. For information on how we can help your organization make and carry out these decisions, write to me.

My IT research firm, Computer Economics provides metrics for IT management, such as IT spending and staffing benchmarks, ROI/TCO studies, outsourcing statistics, and more.

Go to latest postings

Search the Spectator!
Join over 1,700 subscribers on the Spectator email list!
Max. 1-2 times/month.
Easy one-click to unsubscribe anytime.

Follow me on Twitter
My RSS feed RSS News Feed

Computer Economics
ERP Support Staffing Ratios
Outsourcing Statistics
IT Spending and Staffing Benchmarks
IT Staffing Ratios
IT Management Best Practices
Worldwide Technology Trends
IT Salary Report

Get these headlines on your site, free!


2014 Best Independent ERP Blog - Winner

2013 Best ERP Writer - Winner

Alltop. We're kind of a big deal.
Constant Contact 2010 All Star Technobabble Top 100 Analyst Blogs

Key References
Strativa: Business strategy consulting, strategic planning
Strativa: IT strategy consulting
Strativa: Business process improvement, process mapping, consultants
Strativa: IT due diligence
Strativa: ERP software selection consulting and vendor evaluation
Strativa: CRM software selection consulting and vendor evaluation
Strativa: Project management consulting, change management
StreetWolf: Digital creative studio specializing in web, mobile and social applications
Enterprise IT News: diginomica

Spectator Archives
May 2002
June 2002
July 2002
August 2002
September 2002
October 2002
November 2002
December 2002
January 2003
February 2003
March 2003
April 2003
May 2003
June 2003
July 2003
August 2003
September 2003
October 2003
November 2003
December 2003
January 2004
February 2004
March 2004
April 2004
May 2004
June 2004
July 2004
August 2004
September 2004
October 2004
November 2004
December 2004
January 2005
February 2005
March 2005
April 2005
May 2005
June 2005
July 2005
August 2005
September 2005
October 2005
November 2005
December 2005
January 2006
February 2006
March 2006
April 2006
May 2006
June 2006
July 2006
August 2006
September 2006
October 2006
November 2006
December 2006
January 2007
February 2007
March 2007
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
November 2007
December 2007
January 2008
February 2008
March 2008
April 2008
May 2008
June 2008
July 2008
August 2008
September 2008
October 2008
November 2008
December 2008
January 2009
February 2009
March 2009
April 2009
May 2009
June 2009
July 2009
August 2009
September 2009
October 2009
November 2009
December 2009
January 2010
February 2010
March 2010
April 2010
June 2010
July 2010
August 2010
September 2010
October 2010
November 2010
December 2010
January 2011
February 2011
March 2011
April 2011
May 2011
July 2011
August 2011
September 2011
October 2011
November 2011
December 2011
January 2012
February 2012
March 2012
April 2012
May 2012
June 2012
July 2012
September 2012
October 2012
December 2012
January 2013
February 2013
March 2013
May 2013
June 2013
July 2013
September 2013
October 2013
December 2013
January 2014
February 2014
March 2014
April 2014
May 2014
June 2014
July 2014
August 2014
September 2014
October 2014
November 2014
December 2014
February 2015
March 2015
April 2015
May 2015
June 2015
July 2015
September 2015
October 2015
November 2015
February 2016
May 2016
June 2016
July 2016
August 2016
September 2016
October 2016
Latest postings