News Analysis: Spinnaker Expands JD Edwards Support With Versytec Acquisition

March 25, 2012

Versytec Acquisition Addresses Growing Demand For JD Edwards Support

Denver, Colorado based Spinnaker Management announced on March 6th, 2012 its acquisition of competitor Versytec. For those who remember their third party maintenance (3PM) history, Versytec was among the first firms to announce third-party maintenance services within a year after PeopleSoft acquired JD Edwards in July 18, 2003. Constellation estimates that Nashua, New Hampshire based Versytec had between 35 to 40 active 3PM customers.
Third-party maintenance describes support and maintenance offerings delivered by non-OEM providers. These vendors can provide a range of options from basic break/fix to bug fixes, performance optimization, tax and regulatory updates, and customization support. Keep in mind, 3PM does not provide access to upgrades and future versions of the OEM’s product. One big driver is the lower cost of delivery, as much as half the cost of the original vendor’s pricing. Today most customers pay in maintenance and support the equivalent of a new license every 5 years without achieving the value. For an average JD Edwards customer that upgrades every 15 years, that's three times the cost of the original license cost. In the latest Constellation research report, third party maintenance is one of many strategies to free up millions for customers to fund innovation.
The Spinnaker-Versytec deal is important for a few reasons:

Many JD Edwards customers seek alternatives to Oracle's pricey maintenance fees. Software ownership costs continue to escalate as vendors accelerate their efforts to capture support and maintenance revenues. From inquiries, surveys, and conversations on the ground, many Oracle JD Edwards World and EnterpriseOne ERP customers seek options to buy-time as they consider whether they upgrade or migrate from their current version. Why? Most JD Edwards customers run stable environments and do not gain any value from the Oracle one-size fits all 22% support policy. Most customers seek phone support and tax and regulatory updates.
The market needs more options and choices in the third party maintenance market. Many OEM vendors have gone to the extreme to eliminate third-party options for their customers. This anti-competitive behavior takes away choice for the customer. A bulked up Spinnaker creates a viable organization that has the critical mass to compete with Oracle. The combined entity provides third party support services to an estimated ~~100~~ 160 JD Edwards customers across the globe.
Spinnaker Support offers a different approach to third party maintenance. Spinnaker couples its third party maintenance options with consulting services providing a one-stop shop for JD Edwards customers. Spinnaker also differentiates in its download methodology of customer entitled IP from Oracle. Spinnaker provides customers with a checklist of what to download prior to migration off Oracle support.

The Bottom Line: Users Must Advocate for Third-Party Maintenance Rights Across the Technology Stack

Vendors continue to conspire to remove third-party maintenance as an option for their customers. What's extremely disturbing is how vendors are working hard to prevent customers from having third-party maintenance options. The notion of perpetual software license rights should include the right to self-support software or engage in a third party to provide tax, regulatory, and additional updates. As many vendors try to close up these loopholes, customers are left in a no-man's land position of being forced into de-facto maintenance contracts with only the vendor.
End users need to band together and collectively demand clear rights to third-party support options. Based on survey data, most already believe or feel that 3PM should be a right. Otherwise, users will face a situation similar to automakers forcing drivers to only go to them for maintenance. If some of the industry's largest systems integrators actively entered the third-party support market, it would effectively disrupt the balance of power and put more money into the hands of the end-users and the system integrators.
Figure 1. Visualizing the High Costs of Support And Maintenance

(Right-click to see full image)
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