Monday, July 28, 2008

Oracle increases accusations in SAP lawsuit

We're finally getting a look into what Oracle has discovered in the discovery phase of its lawsuit against SAP and its subsidiary TomorrowNow (TN), which provided third-party maintenance and support contracts for Oracle products.

In an amended complaint filed today, Oracle paints a vivid picture of TN knowingly misappropriating Oracle's intellectual property and SAP knowingly choosing to allow TN to continue in its allegedly illegal operations. Oracle claims that documents uncovered during the discovery phase have "revealed that [SAP] knew from the start that SAP TN's business depended on this extensive illegal scheme...One of the key members of SAP's due diligence team--a former PeopleSoft employee--reported directly to board member [Shai] Agassi: "I am not sure how TomorrowNow gets access to Peoplesoft software, but its [sic] very likely that TomorrowNow is using the software outside the contractual use rights granted to them."

Oracle also claims that during the acquisition of TN by SAP that TN's owners "flatly refused to give any such assurances" that TN respected Oracle's IP rights.

Furthermore, Oracle claims to have uncovered evidence of an effort within SAP to move to a more conservative approach to delivering support services, a so-called "Project Blue." As I read Oracle's complaint, it appears that Project Blue would have involved TN giving up the maintenance of centralized copies of PeopleSoft and JDE and doing all customer support remotely on the customer's system. Oracle claims that SAP and TN eventually decided against Project Blue.

The complaint is now 70 pages, with substantial detail, and is quite an interesting read. Computerworld has a short article on it. But read Oracle's complaint to get a full picture.

Oracle chose to file this amended complaint today, the day before SAP reports its second quarter earnings, guaranteeing that analysts will be asking questions about this tomorrow.

This case puts a real obstacle in the path of the third-party maintenance model, a model that I hope will prove viable in the long run. Major software vendors, such as both Oracle and SAP, have too much power, too much control over their installed base customers and too little competition. Third-party maintenance gives customers another option and leverage over the unrestrained pricing power of the major vendors. When you buy a Lexus, you are not obligated to go to the Lexus dealer for maintenance. Why should enterprise software be any different?

Nevertheless, third-party service providers have to operate within the restraints of fair competition. Hopefully this case will be resolved in a way that makes the boundaries clear, so that clients have choices.

Update, July 29: SAP issued a terse statement acknowledging Oracle's amended complaint, simply: "Today, Oracle filed an amended complaint in Oracle v. SAP. SAP’s response is due to the Court on September 11, 2008. This amended complaint repeats many of the themes and allegations in Oracle’s amended complaint filed in 2007. SAP will respond to this amended complaint in Court."

I'm sure SAP would rather focus on its earning announcement today. SAP is reporting second-quarter results that beat most analyst estimates and gave a more positive outlook on its full-year guidance.

Related posts
SAP puts TomorrowNow out of its misery
Vendor maintenance fees: just say no
Legal basis for third-party ERP support industry
Oracle wants to broaden lawsuit against SAP and TomorrowNow

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