Rimini Street is an independent third-party maintenance and support provider for Siebel, PeopleSoft, JD Edwards, Oracle E-Business Suite Database, and SAP licensees. The Las Vegas headquartered private company was founded in 2005 by CEO Seth Ravin, and has a loyal and growing number of customers who find the guaranteed annual support fee savings of 50% compelling.
2011 marked an inflection in Rimini Street’s growth trajectory. It achieved significant growth in revenue, sales bookings and average contract value. The company claims to now have multi-year contracts with more than 450 clients. Although annual revenue for 2011 was a modest $33 million, the more telling figure is its $394 million backlog. This large backlog was substantially boosted by its extraordinary fourth quarter that saw bookings of $110 million. The company’s average contract term has increased to 15 years and average contract value increased 86 percent on a year-on-year basis.
Third party maintenance has been an established market since the 1980s when customers sought the convenience of a a consolidated service level that guaranteed performance across multiple vendors’ systems. Since then, price has become another reason for seeking third party maintenance. Rimini Street’s Standard Support programme offers production support as well as guaranteed 30 minutes response and a named primary support engineer. Clients can remain on their current software release without any required upgrades or migrations for at least ten years. It is the first ISO-certified provider of global third-party enterprise software support services. Clients who have switched from vendor support to Rimini Street’s third party support include 3M, Arcelor Mittal, AT&T, Convergys, Eircom, Embraer, Jones Lang LaSalle, Siemens, ThyssenKrupp and YMCA among the 450.
In 2011, Rimini Street quadrupled sales bookings to international clients. Today, the company has offices in Australia, Brazil, Germany, Singapore and the UK in addition to its US operations. Through these operations, it is supporting clients in 60 countries, and through its partners, including Citrix, IBM and Microsoft, it can cover a further 140 countries. Arguably the only barrier to its faster growth is litigation. In January 2010, Oracle filed a suit agains Rimini Street, claiming “theft of Oracle’s software and related support materials.” Trial date has been set for January 2013. As a result of this scheduled hearing, Rimini Street has delayed its planned IPO to late 2013.
Several industry dynamics emerge from analysing Rimini Street’s progress. Cost of maintenance remains unacceptable. When there is a viable choice, customers, even blue chip multinationals, are choosing alternatives that present better value for money. We saw in an earlier analysis how cost of maintenance is in part contributing to the move to open source. This is an old problem that persists due to a complex mix of inertia, risk aversion and preferential relationships with incumbent vendors.
Change is not coming any time soon. Despite the excitement about cloud computing, in the enterprise application arena, customers are still happy to enter long term support contracts. By long we mean 15 years, as evidenced by Rimini’s average contract duration. So while vendor marketing messages are jumping on new bandwagons, its sales and services teams are still having to deal with the slow pace of change.
And finally, for discerning investors, there is value outside the mobile and social worlds. Rimini Street’s multi-year contracts provide a degree of predictability that is enviable. This will be a much anticipated IPO, and should inspire other annuity based businesses owners to re-assess exit strategies. When Rimini clears its legal hurdles, it should be on track to join its peers in Holway’s Boring Awards ranks.
Image credit: Kevin Carden