Larry Dignan and I met with Seth Ravin, CEO RiminiStreet yesterday. One of the key questions I have is around how a maintenance and support company can run and grow a profitable business when its headline selling point is cutting cost. In RiminiStreet's case, the cost saving for SAP and Oracle customers is claimed to be 50% of standard maintenance costs which normally range between 17-22%.
It turns out there are two broad theories of filling technical positions.
Many young people with relatively little experience that are modest cost
A smaller number of highly experiences engineers that are relatively costly
RiminiStreet has chosen the second option. Given the over arching business model, the company claims this translates into a higher margin at lower cost to the end customer. How? After the video, Seth said: "Often we'll hear a situation where a company has been struggling to solve a problem, spending a ton of money only to find the vendor answer is upgrade. Along comes one of our engineers who says: 'I know what this is about - I've seen it before.' That happens a lot and is why we value and chose engineers with the minimum of 10 years' experience. They resolve problems in a fraction of the time of less experienced engineers."
So there you have it. Experience trumps low cost but at better margins.
Seth explains this in the above video segment. (running time 1 min 18 secs)