Rimini Street going for IPO - more disruption for the incumbents

Den Howlett Profile picture for user gonzodaddy November 6, 2013
Summary:
Rimini Street may be embroiled in a bruising battle with Oracle over alleged IP theft but that isn't stopping it from filing for a proposed IPO. Ballsy or what?

rimini results
In what must be one of the shortest press releases I've ever seen, Rimini Street announced:

Rimini Street completed the confidential submission of its draft registration statement with the SEC on Monday, November 4, 2013. The offering is expected to commence after the SEC completes the review process and the Company determines other conditions are appropriate for the offering to commence.

Wow!

Those who have been following the third party maintenance market will know that Rimini Street is CEO Seth Ravin's second foray into this market. The first, TomorrowNow ended in tears after it was acquired by SAP only to be successfully sued by Oracle for IP theft. The original award was overturned yet the story refuses to die. Wikipedia has all the gory details.

I must admit the announcement caught me by surprise given that Rimini Street itself is caught up in a long running battle with Oracle. It's a re-run of the TomorrowNow story only this time around, Ravin and crew are far better prepared and organized. For clarity, Ravin wasn't at TomorrowNow when Oracle went after it, neither is there any suggestion he was involved in any wrongdoing.

Rimini Street must be feeling supremely confidant (or barking mad) to signal an IPO when the outcome of any trial is unknown. Regardless, it keeps posting great numbers as shown in the graphic at the top of this story.

The company is tightlipped on many aspects of its activities so if nothing else, we can expect a drip feeding of data to help understand just how well it is faring. My guess is they believe there's a good shot at getting close to $100 million in annual revenue fairly soon if not now. That's pretty much the lower limit for an IPO these days. I'm also guessing that regardless of lawsuits, the market will welcome this IPO. Why?

Third party maintenance is a lucrative annuity business. The incumbent vendors have profited enormously from this with gross margins in the 85-90% range from a captive market that rarely looks elsewhere. That spells opportunity in a market worth billions of dollars from many thousands of customers.

Rimini Street has a very simple and easy to understand model that customers clearly like: bring your software to us and we'll maintain it for you at 50% of what you're paying today.

From what I can understand, there are two types of customer that can benefit most from Rimini Street's 3PM alternative:

  1. Those who are in steady state and don't plan to make radical changes to their back office landscape ay time soon.
  2. Those who need to release cost into IT (or other) budgets for innovation.

While Oracle customers on PeopleSoft and JD Edwards solutions remain Rimini Street's prime target, SAP is also in its gunsights.

There is a bigger picture here. Right now, Rimini Street is the most public of any vendor that is tilting at the ERP giants. The market was frozen when Oracle took on SAP but there are plenty of people watching how well this pans out. If Rimini Street wins in its battle with Oracle - and I do know it is quietly confident on that front but not arrogant enough to think it is a slam dunk - then as first mover in public markets allows it to get cheap capital with which to accelerate marketing its services.

Not only will that put pressure on the giants, it will open the floodgates for others to pile into the market. Viewed from that standpoint, Rimini Street will be betting that first mover advantage will carry it along. It will also be betting that its business margins are such that others with better brand strength - such as Accenture and IBM - are not tempted to compete. That might be whistling in the wind given that services businesses are looking around for new opportunities.

As always, we will need to read what Rimini Street has to say once the S1 is filed.

Disclosure: SAP and Oracle are premier partners

Featured image credit: Canvass Systems

 

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