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Was there debate within PeopleSoft that it might be a bit shortsighted not to give steady-as-you-go maintenance?
Other than from me? You had development lining up on the side of, 'Absolutely hold to these support polices.' The consulting group wants to sell upgrade services. The development organization only wants to support a limited number of product lines, and there are practical reasons for that. They can't technically support 10 lines forever. In general, they were just incensed it accreted life to releases that they wanted to see retired. Isn't this a problem for all software? Everyone has to carry forward their baggage, and a backwards compatibility. Very rarely do you come out with a brand new release that has no connection, in technology, to what you had before, because then you open up the whole competitive realm. 'Well, hell, if your new product isn't really an upgrade, it's a migration, then I might as well look at everybody's else's if I am going to move to a migration.' How have companies managed this problem before your software maintenance businesses existed? They thought they could basically use the stick to beat customers forward by threatening them. You've seen that with Oracle. Siebel is the same way -- basically, if you don't upgrade, we're going to pull your support, you'll rue the day, you'll get nothing from us, and we'll still charge you the full amount. What are the reasons your customers opt for third-party software maintenance? They do it for different reasons. The small customers were making the move, because it was right after the dot-com meltdown. Prior to that, people were very optimistic, thinking they would be growing 10 times their size. They went in and bought PeopleSoft; it was the Rolls-Royce of HR systems and finance. So now they're stuck with the Rolls-Royce. They love it; they don't want to get rid of it. But they can't afford to keep it. So, a lot of those people, by switching to third-party maintenance, actually were able to keep the software they loved at price points they could afford. Why did you leave TomorrowNow after the acquisition by SAP? I left three months after the SAP acquisition; as an entrepreneur I needed to be on to my next thing. I actually was going to go build a software company, but after looking at it, I couldn't stay away from the maintenance stream. When you've got a 90% profit margin, it's just too hard to resist. And TomorrowNow didn't even take 1% of the market. As soon as Oracle announced its acquisition of Siebel, I decided to launch Rimini Street and offer the first third-party alternative into Siebel space. Oracle must love you, especially given its suit against SAP -- targeted at TomorrowNow. Oh yeah. I announced Rimini Street at OracleWorld 2005 and I think the words were, 'He's back.' As soon as my noncompetes expired with PeopleSoft and J.D. Edwards products, we introduced those at Rimini Street, too. So now you have two companies -- the captured, SAP-TomorrowNow and our independent Rimini Street -- and we are the only two really credible companies in the industry. The Oracle lawsuit against TomorrowNow is notable for its strong language -- "corporate theft on a grand scale." Some analysts said that one of the aims of the lawsuit was to scare companies off using third-party maintenance. Just to give you that color from the lawsuit -- it hasn't deterred the business. The lawsuit actually opened up business -- because some people didn't even know there was a choice. A lot of people read the lawsuit and said, 'My God, Merck and Honeywell, and all these large companies using third-party support.' And instead of saying, 'Wow, look what happened here!' The issue really is, 'Holy gee, am I the only guy paying full price?' What about maintenance of SAP software at Rimini? I have a noncompete that expires in January. Let's just say, we're looking with interest at the SAP market. With 30,000 customers, who wouldn't be? They recognize what is good for the goose is good for the gander. You can't complain and say you want Oracle to open up and allow third parties more access and think that is not going to boomerang back on you. They know this is about open access. AMR analyst Jim Shepherd makes the argument that because everything is changing -- the software platform, the underlying components, your company's business -- that the software needs to be continuously updated. That's not what we're hearing from clients. They have incredibly stable platforms that they feel like they can run their business on for 10 years. And, in fact, if you look at the recent enhancements from the PeopleSoft product line, it is akin to heated and cooling cup holders -- they're really cool, but it doesn't help me pay my employee any faster. Who do you go to when you make your pitch? The CEO, the CIO -- who is most receptive to your message? It's gotta be the CIO and the CFO. The reason is, this is a lot like outsourcing. You're not going to go pitch the IT team how great it is to send your jobs to Infosys. When we come in, how much excitement is there to tell a team, 'Hey, we've got some great news for you -- you guys are going to drive the same car for the next five to seven years instead of that new one you were hoping to play with.' A lot of IT folks do want the excitement of getting new tools and new technology to play with -- and that is part of the fun of it. Our decision is very much a cost-driven decision, so it is very often the CFO or the CIO who says, 'I'm the guy who has to go before the board and justify we need to spend $2 million on an upgrade when we did it just three years ago, and I can't put down on paper how that money is going to be returned to us in benefits.' What about people who have just upgraded to the newest version of software -- are they off-limits? We used to work primarily with more retired or retiring-level versions of the software. Today, 30% to 40% of our business is on the latest versions of the software, so it is people who literally go and do the next upgrade and say, 'You know what, we are done for the next decade. And all that money we bank over the next decade? We will then do a capital expense because a whole new version of software is coming.' In 2015, '17, as late as 2018, you'll see a mature Fusion product against a mature NetWeaver product from SAP, hell Microsoft will probably be offering a full enterprise-level product at the rate they are investing. Rather than play the upgrade game every two or three years that doesn't necessarily yield results but ties up the entire IT team, costs a fortune, instead we're going to make a generational change. How long should a company hold on to a software product? We have more customers than ever looking for five- and 10-year guarantees for support. No one makes this change for a six-month change; it is not worth it. Let us know what you think about the story; email: Linda Tucci, Senior News Writer It doesn't take much to get Seth Ravin badmouthing big software companies. Ravin co-founded TomorrowNow, which he sold to SAP, and eventually went on to found Rimini Street Inc., an independent provider of enterprise software support services for Siebel Systems Inc., PeopleSoft Inc. and J.D. Edwards & Co. licensees. The companies share the same aim: make software last longer. Ravin's idea of software maintenance evolved from his work at PeopleSoft in the late 1990s. He was in charge of getting 4,000-plus customers through Y2K. The board authorized Ravin to quietly sell customers a Y2K package of support -- on top of their regular maintenance support -- so they could stay on their older releases. Indeed, as word of the special program spread, enthusiasm reached fever pitch. By 1999, Ravin had customers left and right willing to pay him more than regular maintenance fees, so they wouldn't have to upgrade. Not long after, he left PeopleSoft to join former colleague Andrew Nelson, who had a little consulting business, TomorrowNow. What is the biggest challenge in getting a job as a first-time CIO? Is it out-competing others who look similar on paper?
I think there is a tremendous amount of competition. Most of the CIO positions out there are usually going through some type of an executive recruiting network. The recruiters I talked to don't usually pull up a set of criteria in a database online. One recruiter I talked to doesn't even recommend candidates putting information into an executive recruiting online database, because most executive recruiters aren't going to use it. They're going to look to the contacts and network of sitting CIOs or deputy CIOs to ask if there is someone on their staff or someone they know. You became CIO of the World Wildlife Fund at age 37. What helped you most to get that job? I was recruited for it. I did not approach an executive recruiter for that position; they approached me, at the recommendation of another sitting CIO. I had established my credentials in the private and for-profit sector. I had gotten experience with a variety of technologies at some pretty tier-one organizations: it was Sallie Mae on the financial services side, and PricewaterhouseCoopers on the consulting side. I had gotten all my tickets punched. I got my technical MBA at Johns Hopkins University. I actually took it a step farther. A year after I obtained by graduate degree I started teaching as an adjunct faculty at Johns Hopkins -- intentionally. As a way to increase your network? Increase my network, increase my exposure. As an adjunct faculty I was giving back to the IT community and the educational community, but at the same time I was greasing the skids for easier access to publications. When someone was looking at my bio and saw I was a director of this, a tech MBA and teach at a graduate level, when I submitted articles I believe they had a little more merit behind them. What's the biggest mistake you made in plotting your career? I'm not sure that I made any. None? I really don't think that I have. I've gotten consulting experience, I've gotten for-profit experience, I've gotten Big Five experience, I got my tech MBA, I've got publishing experience, I've got my graduate adjunct faculty. The only thing that I would -- I don't know if this is really a mistake. I was about to say, started my graduate work earlier. But Hopkins wouldn't really let me enroll in the program until I had a specific number of years of business experience. Fifty percent of your experience is in consulting, and you strongly recommend that aspiring CIOs work as consultants. Why? You've got to get both sides of the fence if you want to be a viable CIO. You have to understand the consulting proposition. You have to know also how to manage consultants and vendors. Being a consultant makes you a little bit humble. There are many instances where you have to sidestep and put the brakes on what you may know technically or business wise. You may have to deal with a client or a customer that is not that smart or that doesn't know as much as you do, and you've got to figure out creative and diplomatic ways to get that customer on board or eliminate any roadblocks that the customer may be putting up. In the organizations that use consultants regularly, some of the internal employees are a little bit jaded. They're thinking, 'Why did we have to go to the outside, when we could have probably done this on the inside.' Serving in a consulting role gives you far more experience than flat-out IT experience. I have a simple phrase: IT drives technology decisions. The business units drive application business technology. Then, halfway through Chapter 8 is when I start talking about integrating sports to build your relationships and to grow your network and build stronger relationships with your vendors. It doesn't have to be about who pays for what, as I clarified in my book. My guidance to people is, check what your policies are. If there is a no-pay policy, fine, pay for yourself. There are some clear benefits of getting out of the office and spending some time with people, getting to know them. And at the end of the day, because I have a better relationship both professionally and through sports, I have several vendors who I can pick up the phone and say, 'Listen Tom, I need this done, you need to help me out with this.' Now granted, they should be able to do that regardless, as a vendor. But it doesn't work that way. And if you look at the quotes from the vendors in the book, people tend to reciprocate, form partnerships and get more stuff done, cut through the [bull], when they have a better relationship. And I have found that a 30-minute meeting in my office doesn't get me a better relationship with a strategic vendor. Let us know what you think about the story; email: Linda Tucci, Senior News Writer Gregory Smith, author of "Straight to the Top: Becoming a World-Class CIO" and CIO of the World Wildlife Fund, talks about his carefully plotted route to the executive ranks and offers some tips for aspiring CIOs. Who do you report to?
The COO [chief operating officer]. We don't have a dedicated CIO role right now; our CTO is largely performing that function. However, my boss is a former CIO. The CTO and I report to the COO. What percentage of your job is spent working on compliance regulations? In 2004, I spent approximately 40% of my time on compliance. Things really fired up in 2004. When I came on board, compliance activities had been building for at least the last 12 months. I was originally hired NOT to do compliance directly. I was to handle the security aspects of compliance only. Then last fall, my boss asked for me to become corporate compliance officer, in addition to my role as CSO. So now I'm involved with other compliance issues. There was no single, executive-level focal point before I took it over. Prior to that, each business unit would identify their issues and address compliance at their own levels. Do you have any other staff dedicated to compliance? I have one full-time coordinator and two part-time coordinators working on compliance. We also involve the appropriate business people. The full-time coordinator is a temporary position, ending later this year (2005). Then we'll be relying upon the part-time positions to provide program coordination and help the individual contributors when they have problems. The full-time temporary person was needed initially to get the program on its feet. What compliance regulations have you had to comply with in the past year? Which were the most challenging? In 2004, our emphasis was on two areas. First with Visa. Visa has a cardholder information security program. We had to demonstrate compliance with that. Most people might not consider Visa compliance as a big deal compared with SOX [Sarbanes-Oxley] or GLBA [Gramm-Leach-Bliley Act] -- but it was important to our organization. There were real consequences if we didn't meet their test -- they could revoke our right to process Visa transactions. Visa has to approve anyone that wants to process transactions. This security program is a big strategic initiative for them. It also includes a lot of risk for us -- considering we could lose a huge revenue stream. The other big regulation challenge in 2004 was getting our SAS 70 Type 2 compliance report. We needed to get this report for our customers -- all financial institutions. SAS 70 is a third-party attestation, a common instrument used when two parties work closely together and they want to make sure the other is doing what they're contractually obligated to do. When a bank outsources work to a vendor, examining the SAS 70 report is typically part of the financial institution's risk management program. The banks will look for certain controls in the vendor's organization. It's an annual event for us; 2004 was our first one. Industry-wide, the increased emphasis on SAS 70, which has been around for quite some time now, has developed as a direct result of increased regulatory pressure on financial institutions. Financial institutions need to demonstrate good risk management practices when they are working with particular vendors or service providers. It's a reality for any financial institution because almost all of them outsource some aspect of their IT or tech operations, thus placing customer date at risk. Banks in the past have tended to implicitly outsource risk management along with the systems. Regulators are now demanding that financial institutions prove they are actively conducting risk management on any technology outsourcing contracts. One thing we try to do is recognize what the burden is on the customer. From the auditors -- we try to deliver our services in a way that they meet that burden of proof. We see a lot of the compliance work we do on behalf of our customers as a way to differentiate ourselves in the market. Issues have come up, but nothing I consider to be serious. One example is we had some faulty maintenance performed on an exterior door to our building. When the auditor was checking our physical perimeter, they found the door didn't close completely all the time. Even though that door provided no direct access to a protected area, the incident was noted in the report and we did a follow-up with the maintenance group to explain how important this issue was. Some of our time and effort working with external auditors is spent working with auditors to help them interpret the regulations for our specific context. These regulations are very complex themselves. Issues brought up by the auditors are often matters of interpretation. We sometimes have to point out to the auditors that there isn't an issue and why -- typically because we have a different control or other compensating controls. But in the end, if the auditor is insistent, we will usually accept the issue and make the necessary changes for the customers. However, there have never been any real show stoppers. RELATED TIPS
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