The Lawsuit : Oracle vs SAP

SAP Responds to Oracle Complaint
by: Jerry Liao

A couple of months back, I wrote about the lawsuit filed by Oracle Corporation against SAP. Oracle has accused SAP of hacking in to its computers and stealing vital product nformation. Oracle has accused SAP of “corporate theft on a grand scale” by gaining illegal access to one of its customer support websites. SAP and Oracle are fierce rivals in the business software segment.

Oracle further claimed that TomorrowNow (TN) – a firm bought by SAP, had accessed Oracle’s computer network last year and illegally downloaded and assembled a storehouse of stolen Oracle intellectual property comprising copyrighted software and other material. During Oracle’s numerous acquisitions and takeovers, SAP offered Oracle customers a “safe passage” programs that would guarantee support for Oracle products with the help of companies like TomorrowNow. TN provides cut-rate maintenance services for products from PeopleSoft and J.D. Edwards. For SAP, the aim was to pinch Oracle’s revenue streams and to capture some customers.

Back then, SAP said it would not comment until it had reviewed the 44-page lawsuit. Just a couple of weeks back, SAP issued its respond to the complaint filed by Oracle:

SAP AG, together with SAP America and its subsidiary TomorrowNow, filed its answer to a complaint originally filed by Oracle Corporation on March 22, 2007 and subsequently amended on June 1, 2007. The filing in U.S. District Court represents the first formal SAP response to Oracle’s complaint.

In the answer, SAP said TomorrowNow was authorized to download materials from Oracle’s Web site on behalf of TomorrowNow customers. At the same time, SAP acknowledged that some inappropriate downloads of fixes and support documents occurred at TomorrowNow. Importantly, SAP affirmed that what was downloaded at TomorrowNow stayed in that subsidiary’s separate systems. SAP did not have access to Oracle intellectual property via TomorrowNow.

The United States Department of Justice has requested that SAP and TomorrowNow provide certain documents. SAP and TomorrowNow intend to fully cooperate with the request. Even a single inappropriate download is unacceptable from my perspective. We regret very much that this occurred,” said Henning Kagermann, CEO, SAP AG. “I want to reassure our investors, customers, partners and employees that SAP takes any departure from the high standards we set for all of our businesses very seriously, regardless of where it occurred or how confined it may be. When I learned what happened, I promptly took action to strengthen operational oversight at TomorrowNow while assuring that we maintain excellent service for TomorrowNow’s customers going forward.”

SAP Did Not Have Access to Oracle Materials through TomorrowNow
SAP stated that it did not have access to Oracle materials downloaded by TomorrowNow. SAP explained that it intentionally created a business structure that maintained a firewall between TomorrowNow and SAP and that it was satisfied that SAP AG or SAP America did not access Oracle intellectual property via TomorrowNow.

Most Materials Downloaded Appropriately by TomorrowNow TomorrowNow often downloads support materials for and on behalf of its customers, who have chosen to seek third-party support for their legacy Oracle applications. Third-party maintenance providers like TomorrowNow depend on their customers in this instance, companies who use Oracle-provided software ­permitting the service provider access to support materials, through the customer’s password, to provide support and service for those customers’ Oracle applications. SAP acknowledged that some inappropriate downloads occurred at TomorrowNow.

Changes Announced at TomorrowNow In addition to announcing its filing with the Court, SAP also announced that it has instituted changes in TomorrowNow’s operational management to ensure compliance with appropriate business practices. These steps include:

• Appointment of SAP America Chief Operating Officer and former Chief Financial Officer Mark White as TomorrowNow’s Executive Chairman to manage TomorrowNow operations, including compliance programs. Andrew Nelson, TomorrowNow’s CEO, will report to Mark White;

• Enforcement of existing procedures and new policies;

• Renewed training for TomorrowNow employees to assure understanding of the policies and procedures.

What is my take on this issue? The actual damage to Oracle is very minimal – null even. Downloading materials from a competitors site is a common practice – they even use fake contact information to do this. The only problem here is TN downloaded thousand of documents from Oracle’s support site. And another problem is they are SAPs subsidiary – a company acquired to undercut Oracle’s major revenue stream. For the Philippines alone, SAP Philippines officials revealed that Alaska Corporation has dropped Oracle totally in favor of SAP applications.

Oracle simply wants publicity and to hurt SAPs image and reputation. I believe heads will roll at TomorrowNow and SAP should do a lot of explanation to its stakeholders—customers, employees, shareholders, and the community of analysts and market researchers. So far, SAP claimed TN downloaded only support materials, if Oracle will be able to prove that TN downloaded more than what SAP is claiming – then more damages will come to SAP.

*****

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