TPM vendor Rimini Street continues to expand its portfolio of services, announcing a new application management services (AMS) offering today for SAP customers who are already signed up to its SAP support service. The company has also reported Q2 financials, beating revenue estimates but posting much lower earnings than expected.
Quarterly revenue of $68.0 million was up 8.5% year over year, but while the net loss per share improved from $0.43 a year ago to $0.03 for the latest quarter, this was significantly below analyst consensus estimates. One notable bright spot was the number of active clients, up 17% year over year at just under 1900. We'll update later if we hear more of note from the earnings call.
Speaking to diginomica yesterday in advance of today's news, CEO Seth Ravin told us he believes the SAP AMS market is ripe for disruption, with incumbent providers using AMS as a loss leader for selling their digital transformation and cloud migration services.
The customer is winding up with a terrible experience ... These companies are not focused on running their systems, they're really just doing it as a way to get in the door to sell them all the other billable services they want.
Our business is optimization, our business is extending the life of these systems and keep driving maximum return on investment. That is not the focus of these other guys, their focus is to try and change them out to something new with the vendor.
So you're going to watch us come in, charge a little bit more money, drive a better outcome, drive a better return on investment, drive better value, and we're going to get the job done because we're the right guys to focus on and we're going to integrate it with our support.
That synergy with the existing support offering is an important part of the proposition, he adds:
We're not going to just go out there and compete. If you want our AMS business, if you want us to run your system, you have to take our support as well.
Mindset of Rimini Street customers
The market position is similar to what led to Rimini Street introducing its Salesforce support service earlier this year. Incumbent providers are too focused on implementation services, and therefore don't understand how to excel at operational support, says Ravin.
There is a difference in the business between implementation, and production support. If you believe that those are two completely different businesses that require different business models, different skill sets, different resources, then Rimini Street becomes the expert in the support arena, and post-production support for AMS just makes sense, as an extension of our overall support.
The natural market here is among customers that don't yet buy into the need to upgrade to S/4 HANA or Oracle SaaS, and who therefore want to find ways of optimizing the running costs of their existing systems, he explains.
Go to the mindset of a Rimini inclined prospect, our customers. It's going to be very much around optimization, not moving forward with big upgrades at this time, they don't see the value.
Every customer we're working with, we talk about two things. The two most important drivers of every IT spending project are, how is this going to help me with competitive advantage? How is this going to help me grow? If the project doesn't answer either one of those positively, then it shouldn't even be on the agenda today.
The Robin Hood of the maintenance business
That doesn't mean that Rimini Street prospects aren't interested in digital transformation — in fact one of the most frequent drivers for adopting Rimini Street is the ability to free up budget for transformation projects, says Ravin.
The truth is, so many CIOs are being told the following. One, keep all your systems running. Two, we want you to do digital transformation. And three, oh, by the way, we're not giving you any additional funds or resources to do it.
With that scenario, the CIO has to find resources within their existing budget. Well, how do you do that? I mean, with Oracle and SAP taking 90% plus profit margins, they're eating up all your cash that should be used for digital transformation and other key projects.
We are, in many ways, the Robin Hood of the maintenance business, taking all that excess profit from Oracle and SAP's pocket. And we're allowing customers to keep that money and invest it in digital transformation. So we have become, for many large companies [and] government entities, the funding engine for digital transformation projects. That's the new role that we play in so many companies.
This is a big shift in how Rimini Street is perceived that's happened over the past few years, from a cost-saving option to a strategic enabler, he believes.
The craziest thing of all, which just happened over the last few years, we started off fifteen years ago as the half-off guys ...
Where we are 15 years later is, the dialog is so much more strategic now. Instead of just, 'Hey, you're half off,' we're now talking about roadmap. Where are you going to be, what systems are you going to use over the next 5, 10, 15 years?
Another step by Rimini Street to double down on its operational support skills and tap into the large pool of SAP customers who don't yet see the business case for upgrading to SAP's latest platforms. It's not that they don't want to embrace the latest digital innovations. It's just that they don't see SAP''s upgrade path as the most urgent next step on that journey.