Rimini Street, Inc. (RMNI) Earnings Call Transcript & Summary

Well, good morning, good afternoon, depending on where you're located. I'd like to welcome everyone who's attending today's webinar, Dollars and Cents: The ROI of Cloud for ERP Systems. Now if you want to know more about cloud in general, don't worry, we're going to talk about cloud for all systems but certainly with a focus on ERP. So first, of course, we have to do this legal disclaimer slide. Please take a moment to read it. While you're reading through it, I'm -- I trust and pray that everyone is staying safe and following all the guidelines during this virus times, but I pray that everyone is safe. It's not in the legal disclaimer. That's just something I added. So with that, let's talk about what we're going to do today. We're going to talk about cloud return on investment, things to think about when building that calculation, some of the things that you may not consider when building that model. So obviously, a lot of people think about cloud and saving on infrastructure costs, hardware, compute, storage, things like that, which is true. But there's a number of other factors that go into that equation. And that's what we're going to talk through today. Again, a lot of this information is from my own real-world examples and examples of working with clients over the years. At the same time, many of you have your own examples. And so we may not have time today to talk through all those, but I'd love to hear about that. So again, click on my face, if you will, the icon, and we can talk later on. We can work out a discussion, have a longer conversation, maybe just e-mail back and forth. And obviously, I'm on LinkedIn, too. But I really want to spend a lot of time today talking out the 10 reasons why public cloud -- when I talk about public cloud, we'll define that, but that's what you think of as Amazon or Azure or Google, why public cloud is probably the right choice for just about everybody on this call and for some of your systems, it's the right choice. So that's what we're going to cover today. Just a quick background on where I've been and what I've been doing and why I love to talk about cloud. So I've been an IT executive, CIO, Vice President, et cetera, for the last 15-or-so years. I started out a long time ago. That picture is not too old, I hope. But -- so I was a developer a long time ago. So I've been in this industry for about 28 to 30 years now. And so I've been in a lot of different companies, large and small companies, and I've been through the journey back actually the days of the mainframe, through client server, through data centers and now to the cloud, we've almost -- could say we've come to full circle. So I've had a lot of experiences, and I'd like to say that I've learned from a lot of my mistakes, and that's what I also want to share with you today. So again, these are industry examples but also best practice that I've learned working with many companies over the years. Again, reach out to me on LinkedIn, I have publications on there, if you want to learn more. And I'd love to have this conversation in detail with those of you who need more information. Again, whether it's to talk about nuances of Amazon versus Azure versus Google or if you want me to do a business case, and I can help you with the TCO analysis that -- if you're trying to understand when is the right time to really start moving hard and moving your systems and your ERP to the public cloud. So specifics on the agenda today. And again, I was able to read -- thank you, a number of you sent questions in ahead of time, and we were able to change the agenda slightly to, I think, address all the questions. We will have time at the end. When you have specific questions, please go ahead and put them in the chat window. If we can't answer them, I will do a follow-up. And certainly, everyone is welcome to follow up with me, if you wish, and we can connect and answer your questions in more detail. So we're going to talk about where the industry is. I won't spend as much time. I think most of you know what's going on, but give you some nuances that maybe you haven't thought about. Talk about Software as a Service versus Infrastructure as a Service. And specifically, what it means to you for those of you who are running your ERPs, such as an Oracle or an SAP product. Talk about some of the drivers that you may or may not have considered when thinking about moving your ERP to the public cloud. A lot of people, when they think of ERP, they think, "Oh, I need to go to an ERP SaaS cloud." And obviously, there's a lot of different options there. And that's what I want to talk through. Cloud readiness. If you're not in the cloud, definitely, I encourage you to follow with me if you wish or do some research on your own on this. You don't want to jump in without doing a cloud readiness assessment. Again, a lot of people focus on the readiness for the technology and the technical team. But there's a number of other organizations that should be part of your cloud readiness assessment. We're going to talk through that in some detail. And then really just talk about the strategies and how you can really accelerate innovation. Again, when I look back at my own career, I realized that half of my career is nearly spent managing a data center as opposed to managing the applications and systems that were supporting my clients and customers. And so I'm hoping that as we work through this, you can figure out how to get out of that infrastructure management business or application management business and really focus on those systems and tools that drive new sources of revenue, that drive significant cost savings to allow you to roll out that new product or that new service or onboard your customers, et cetera. And then talk about that TCO. Again, you can go out online, all the public cloud providers have calculators out there, you can run their numbers pretty quickly. But that really doesn't give you the full picture. And that's what we're going to talk about today, how to really calculate that total cost of ownership. So just a quick one, talk about what's going on in the world out there. Bottom line is, I think most of you know, the advancement in spend or the increase in spend over the last few years, just looking at the big 3, and really it's the big 2, it's basically Microsoft and Amazon, they're spending billions of dollars each year on their data centers. If you'd start throwing in Google and some of the other providers, billions of dollars are being spent each year on building out data centers around the world. The top 2 have over 200 data centers around the globe at this point. And that numbers are only going to increase. Bottom line is those companies and their buying power is just something that most companies can't win against. And at the same time, the tool sets, where they've come in their ability to manage their cloud infrastructure, the ability to automate that scale up, scale down and failover. And just again, their buying power is something that most companies can't compete with. So again, if you have no plans right now or you're not in the cloud at all, definitely start taking a look at -- just run out real quick and do a TCO calculator just using Infrastructure as a Service, I think you'll be surprised. If you had any upgrades, significant hardware or software upgrades planned in the future, definitely encourage you to do a quick runout and take a look at their calculators, they're free and online, or reach out to me and I can help you walk through it. But the industry is changing significantly. And it's -- as most CIOs know when they come to a new organization, if the organization is not in the cloud, they need to get there pretty quickly. The Board is going to be demanding of it. Now just some terminology here. Everyone has kind of heard, I think, of Infrastructure as a Service. And that's when you think of a Google or an Amazon. There is also Platform as a Service, where you combine different features and functions. But really, it's -- I'd say most people, when they think of cloud, they look at either renting the hardware, the compute or they're letting someone else manage the applications. And in SaaS, I love SaaS. For me, SaaS is something that you as a company would say, "This is not my area. This is not my specialty. I'm going to get it from someone who does it for a living." So whether it's a Zoom or a Team or Windows Office or Google office, things like that, that price point, the availability of those systems, the rich features and the content that they're rolling out, those are things that I definitely love to buy whenever I can from SaaS-based companies. But -- and maybe it's my IT background, where I'm trying to always build and innovate for my customers, for those things that differentiate my company or are core to my company being successful, quite honestly, those are the things I want to kind of run on Infrastructure as a Service because I want to keep control of those systems. I don't want to turn over things that make my company successful to someone else typically. At the same time, that's where you have to do this total cost of ownership. When do you need to be managing that system? Or when do you need to own that system versus when does it make sense to turn over to someone else and rent from them? The key point I would say, before you ever turn over anything to someone on a SaaS, make sure you understand what's going to happen if you want to change your mind later on. That's where it can be very, very difficult. I've been through that, not just in the ERP space but in other systems, where we had to make a decision. We have M&A, divestiture activity and getting that data back, transforming that data into another system, another SaaS provider or even a hosted solution that you manage can be very, very difficult. And again, that's case-by-case basis, and I can talk through that, if you wish. But the main point is, if you're ever looking at comparing an Infrastructure as a Service to SaaS as a service, well, it's kind of like when you're buying a car, ask for the entire invoice. You don't want any surprises later on. Like I bought the car, but I don't get -- wait, I don't get the wheels? You just want to make sure you understand the full invoice. So again, Infrastructure as a Service, that's typically what people think of when they think of an Amazon or an Azure. The SaaS offering is basically your data, but it's hosted by someone else and they're managing that system and that application and change can be difficult. So again, why are companies moving their ERP to public cloud? And again, not talking about their applications, custom COTS they built in .NET or Java or what have you. Why would they take a PeopleSoft or an EBS or JD Edwards or an ECC6, why would they take that ERP and move it to public cloud? Well, at least the #1 reason I've seen, as people understand, think of that last ERP upgrade or maybe the last time you really changed it was your ERP implementation. How much money did you spend? Again, I've been in typically the larger companies, but my ERP implementations were 7 figures and up. And so when you start talking about $1 million or millions of dollars, that's kind of what you have to look like -- look at if you want to take that ERP and go to a SaaS implementation. So in other words, you spent the money already. Can you make the business case to spend that money again and go to a SaaS solution? Or you avoid spending that money, keep all your customizations, move it to the cloud, Amazon, Azure, Google, doesn't matter, save additional money of what you're already spending on your Infrastructure as a Service, avoid that upgrade, avoid that reimplementation, keep all your customizations. That's where I think the real business case and that's where I think the crux of the discussion today is, when you look at what you've spent already. And again, it's not even just that initial implementation. I'm thinking back to a company previous, we had a PeopleSoft implementation. We had over 1,000 customizations in that product. Again, probably shouldn't have, but for whatever reason, when we started looking at the cost to take all those customizations, even assuming that we needed 30% or 40% of them were implemented to get the cost of reimplementing them plus the cost of implementation, it just didn't make sense to us. And so again, that to me, when you're doing your TCO, make sure you're looking at the cost avoidance, the reimplementation costs, the cost of having to redo all your changes. Those can be very significant. And again, the main thing there, if you look at the box there, the gain control, timing of updates, that to me is where you really need to think. For an ERP system, which is typically vital to the success of your company, do you want someone else to own the changes for it? Or do you want to own the changes around it? And my view is I typically want to have -- I want to own those changes myself. So again, that's why so many companies are taking that ERP, whatever it is and moving it into the public cloud. They're happy with it. It works great. Let's go save some more money. Now again, SaaS is not a bad thing. I've used SaaS, what they called it SaaS. You just want to make sure that when you go with SaaS, it's not a -- maybe a 2- or 3-year contract, it's not a 2- or 3-year decision. Because leaving that SaaS provider in 3 years or 4 years, the cost of it could make it impossible. And if you're happy or not happy, you may not have a choice. But again, there's great SaaS providers. And so depending upon where your industry is and what you're looking at, but certainly in collaboration and all the tools around workforce and things like that, there's some incredible tools out there. But again, I would just make sure people are very cautious and understand, is this SaaS decision something I'm very comfortable we're not going to change for 5 or 6 or 7 years? If we had to make a change, what does it take to leave that SaaS vendor? Put those numbers down, that's part of your TCO. At the same time, in the case of an ERP, I definitely ask you to take a look at how much have you invested already in that ERP. Is it doing what you want? What would it cost to add that last 10% versus the cost to take that 90% and reimplement it? So SaaS versus public cloud. And again, just for something for you to think about when you're doing that TCO, the pricing is something that is, obviously, in some cases, pretty easy. I pay this much for a subscription. At the same time, you have to understand what your full run rate costs are and more importantly, what can you do and what can't you do and what are you doing versus what the vendor is doing. So what this slide is trying to show everybody is when you look at vendor SaaS versus taking your existing solution and moving into public cloud, it's very important that you take a rundown through these rows here and say, "Okay, who is going to support in the future?" For example, maintenance. Again, it can be a great thing that your vendor does maintenance for you. But at the same time, if your vendor is doing maintenance for you, then you'd have to kind of adhere to their maintenance schedule. And oh, by the way, they're going to do maintenance. And then you have to test and respond to those maintenance events. Again, depending upon the systems, in the case of Office and collaboration tools, they're trivial, you don't even notice it. And so you take the latest patch, you're great to go. But do you want to be doing maintenance on all of your systems and responding to vendor-dictated road maps? That's really a decision that everyone needs to make. Security. Do you want to have that security handled by the vendor? Again, that's not necessarily a good thing or a bad thing. The upgrades, we talked about that kind of with the maintenance. They have upgrades of the underlying infrastructure that you need to adhere to. So again, when you're starting to look at the pros and cons of a SaaS solution versus your existing solution, which you would move to the public cloud, start looking at these different areas and saying -- because again, the price sometimes is very obvious. I pay this much per month, maybe it's per user or per set number of users or however the pricing is. But then all the other areas of pricing and cost and effort, those are things you need to factor into that decision to move to a SaaS or take your existing software and move to a public cloud provider. So this is where I want to spend, I think, a little more time. When people talk about taking their ERP or for that matter, any of their systems and moving to the public cloud, and again, Amazon, Google, Microsoft, what have you, data center consolidation is typically one that people get. They either have a -- they have a colo that they own or they're hosted or that they purchased or leased, maybe it's a combination. My last company, we had 3 different data centers. One was leased, one we owned and one was a colo share. But again, data center consolidation is certainly a main driver of moving to the cloud. But there's 9 other areas that I definitely want you to think about. And so when you're looking at that business case and building out that TCO, that's where I think you need to make sure that you're addressing all of these areas because there's effort and there's cost and there's time associated with all of it and there's actually value. So for example, increased time to market. People understand that moving to the cloud allows them the great flexibility in scaling up and scaling down their hardware. But you may not realize if your data is in the public cloud and you want to spin up new tools to consume that data, machine learning, business intelligence, things like that, having your data in the cloud allows you to spin up SaaS tools very, very quickly and consume that data, and oh, by the way, turn them down the next week. So for example, previous company, we were looking at inventory management. And quite honestly, taking our data, an on-prem and then buying machine learning or those tools and spinning them up, it's -- just between security and hardware, it's very difficult and expensive. We had taken most of our data in the ERP space and the inventory space and moved to the cloud. That allowed me, in this case, using Microsoft tools, to spin up machine learning tools the same day, consume that data, start doing what-if analysis. A week later, I turn them off. But that's the kind of thing you can do, not when just your ERP is in the cloud but when the data around your ERP is in the cloud. All these other SaaS tools that are around your ERP, which again, machine learning, business intelligence, the whole data warehouse space, there's so much easier to consume when your data is already there. We talked about scaling up and scaling down. Think about it if -- for those of you who manage your ERP in the HR space and open enrollment and things like that, do you buy the hardware that you need for the open enrollment? And then what do you do with the rest of the time? Or do you repurpose your test hardware or your DR hardware and roll the dice? You don't want to be in that place. Trust me, I made those decisions. I'm sure some of these people on this webinar have, you've made those decisions. It's not a fun place to be in. When you're making -- taking on significant risk or cost because you need to respond to an event that happens once or twice a year, why not put it in the cloud, spin them up 2 weeks later, spin them back down. So again, enhanced security. That's an interesting one. I -- one of the main complaints or concerns I would say I have around public clouds, people talk about security. And what I would say for those people who are concerned about cloud and security, take a trip out to any of the -- whether it's Redmond or to meet with Amazon or what have you. They spend billions of dollars a year on security. No company can afford the amount of money and the effort they put in their product. And if you've heard about the breaches, and you should be concerned about breaches, recognize that the breaches you're hearing about -- and you can reach offline and talk to me about this, breaches you're hearing about are not because of the infrastructure. The breaches you're hearing about are because of the application softwares that people did not have protected. So again, the companies -- their living is making these environments work securely and safely. And they spend billions of dollars and no company can compete with them. So security, I think, is not a risk. It's actually significant enhancement that people get by moving to the public cloud. But again, there's a number of different business drivers here. Again, what -- I'll lead with this. When you're looking at your total business case in TCO, you need to at least consider all these different areas. So for example, auditing and licensing. If you want to have a fun exercise, go out to your favorite ERP and your finance and pull all your IT bills that you pay. It may not have all marked as IT, but find all those different bills you paid out. You're going to find out you probably have a dozen pieces of software or hardware that you rent or purchased the previous year that you pay for. So again, when you're building that TCO, make sure you're looking at all the different pieces of software and hardware that are required to run your infrastructure if you have it on-prem. So cloud readiness. This is the fun one. Again, most people, certainly the IT folks, we understand hardware, server administration, network administration, et cetera, database administration, business analysts, project managers, we've got all that down. We talk to that team. We understand what it takes to get to the cloud and readiness. At the same time, if you're going down a cloud journey and you haven't started yet or you just moved your first application or 2, does your security team -- have they modified their processes and procedures around information in the cloud, transmission of data, et cetera? Your governance team, you have a governance team for how you're going to run in the cloud. Does your finance team -- are they aware of what your spend will look like? Who is actually looking at your monthly bill? Again, cloud -- the great thing about cloud is, as you all know, you can rent hardware, rent compute very easily, very cheaply. But you can also go buy a $30,000 machine and have a cost-out there for a month and not use the machine or have a $30,000 cost for a big box you didn't plan on because someone chose the wrong platform. So again, these are things that you need to consider, to worry about when you're talking about getting ready to go into the cloud. So what I do when I work with clients is we do a cloud readiness assessment. We actually interview all these different groups. We talk to different business partners. But we talk about operationally, how you're going to manage spinning up and spinning down, how you're going to control costs. What is your decision process for consuming new applications, new SaaS applications in the cloud? What's your decision process for how things are moved to the cloud and managed and security, things like that? So again, I would strongly encourage you, do a cloud readiness assessment if you're really considering moving to cloud. I can help you if you wish. But sit down and really think about, is the team ready to go? So innovation. This is where, I would say, the last -- in my experience, where I've received the biggest benefit from the cloud. Yes, the Board loves to hear you're going to save them money. The Board loves to hear that they're in the cloud. Let's be candid because everyone else that they're talking to, "Hey, why aren't you guys in the cloud," or "when are you moving into the cloud," or "I love the cloud, I can't believe you're doing any of that." But what you're going to find is when you take your ERP to the cloud, certainly you're going to save money, I mean, obviously you wouldn't do it. But just pure infrastructure savings alone, even if your infrastructure is depreciated, then your cost avoidance in the future, things like that, you're going to save money. But I think what you're going to find is the talent, the time of your people. If you think about how much of your time right now if you're in IT or you're in the business, do you spend worrying about your ERP system, the uptime, disaster recovery, security and [ mates ] and things like that? So again, moving to public cloud, taking some of those costs and dramatically changing is one thing, but freeing up time and talent of your team to focus on new technologies or to focus on ways of using that data and mining it. So in other words, you have an HR system, but are you worried about onboarding? Are you using that information to look at how good a hiring I'm actually doing? Can I correlate my hiring practices by my HR business partner with their performance over 2 years? Again, doing that what-if analysis, where you start mining your data, you start looking at your suppliers and the payment history and delivery and all those kind of things. Are you mining your data? Or are you managing your data? And so for me, the great thing about moving to the cloud is, yes, you make the business case and you get your stuff there. But then what happens is you start freeing up your people. The smartest people are typically the IT folks who know everything about how the ERP works, but they're stuck managing the system. So when you can free them up to not manage this system but to start doing the what-if analysis and consuming that data and figuring out what questions that need to be asked, that's where I think your real success is going to be. TCO. I'm going to finish up real quickly. This one, I definitely love you to reach out and talk to me about only because it's really a case-by-case basis. Now directionally, these numbers are right. If you go out right now and use an Amazon or an Azure calculator, they're going to show your savings are at least as much as, if not more. But when you start looking at your labor, I think that's where the costs are probably even higher than what I'm showing here. So to finish it up here, when you're looking at cloud, make sure you're looking at all TCO, SaaS versus IaaS. When you're looking at SaaS, make sure you realize you're not making a decision for 3 years. You're making a decision for 5, 10 years. And the cost to leave and the cost to stay with SaaS really needs to be fully calculated, again, the customizations, things like that. Always avoid that multiyear cloud lock-in. If you're just moving apps to the cloud, maybe start out with don't do a 3-year reserve or 1-year reserve. And again, I can talk through that. The due diligence of the cloud vendors, once you leave Amazon, Azure or GCP, then it becomes a little bit trickier. So that's something that I can spend a little more time with you. And then I didn't spend as much time in this, but the engineered deals. If you're buying a car and someone says, "Hey, I'm going to give you free maintenance for a year," do you need free maintenance for a year? Why do I need that if I'm buying this car? Just be very, very careful. Those 1-year-off deals, there's, "Hey, this is 1 year, this is special pricing," you're not making a decision for 1 year. You're making a decision for 5 years. And so if someone has to engineer a deal, you have to ask yourself, "Why do they need to engineer that deal to sell it?" It should stand on its own. And then I typically go back, the ERP solution you have today, do you like it? Does it work for you? What if I told you that cost could be 1/3 less without doing a darn thing? What if you have a 1-year payback by moving to the cloud? Those are the kind of things I'd love to talk to you about more in the future. With that, I'm going to stop here and pause and let anyone jump in with questions. I had a number of questions before the meeting. I think I've answered a lot of them. My guess is some of the things I've said, if you're not sure or you don't believe, reach out to me. But let's -- I'll stop here and let anyone jump in with any questions.

We have one question about the TCO example. I have one in this presentation. Again, you can go out to the Amazon and Azure websites and do an infrastructure versus on-prem, but it's nuanced. And so again, if you want to reach out to me, I can talk to you about the 6 or 8 different areas that you really should put into your TCO factors and labor and time and talent are big parts of that equation. Are there any other questions at this time? We have a couple keyed up a question about security. I think I've tried to address that. But this way, if you're in the U.S., the U.S. government is moving many of their systems to the cloud. They're working through that now. So they seem to be pretty secure with the security they're going to get from Amazon or Azure, whoever they finally end up picking. I think that's it. Other questions about SaaS versus IaaS, specifically around SaaS offerings of Oracle, you can reach out to me, if you would, offline, I can talk to you about that and how the pricing is done and talk you through that. But I think that's it at this time. I really appreciate it. I'd love to do this interactively. So again, please reach out. We can chat, e-mail, talk, and I can answer specific questions about your situation, help you with the TCO and let you learn from some of the things that I've learned. And hopefully, you don't have to repeat all the mistakes that I made to get where I am today. So with that, I really appreciate everyone's time today. Please stay safe. And that's it. Thank you very, very much.