Employees gone, lawsuit still unresolved, but despite SAP and TomorrowNow's predicament, third party maintenance seems to be on the rise.
Posted Nov 26, 2007
Early last week, in the shadow of the Thanksgiving holiday, SAP quietly announced the departure of several key executives at its embattled subsidiary TomorrowNow. The resigning executives include the unit's chief executive officer, Andrew Nelson, and "several members of his senior management team," according to a company statement. Mark White, who had been SAP America's chief operating officer when he was appointed executive chairman of TomorrowNow in July 2007, will remain in that position. Contacted by CRM magazine for the explicit reasons for and timing behind the employees' departure, SAP representatives have declined to comment, citing a corporate policy on the subject of personnel actions.
What SAP refers to as a "management transition" comes in the midst of a still-unsettled lawsuit between Oracle and SAP, SAP America, and TomorrowNow, a provider of third-party support for software from Oracle subsidiaries PeopleSoft, JD Edwards, and Siebel Systems. In the suit, Oracle accused SAP's TomorrowNow unit of various violations, including copyright infringement, breach of contract, intentional interference with prospective economic advantage, unfair competition, and of having illegally downloaded proprietary corporate materials; SAP has since admitted that wrongdoing occurred at the unit, but continues to contest the validity of Oracle's larger damage claims. The most recent hearing in the case was held in September, and little has been resolved -- or is likely to be resolved by the courts anytime soon, as the next hearing date has been set for Feb. 9, 2009.
Although that date seems far away -- particularly in light of SAP's public protestations that all could be settled within a few months -- some experts believe that it's the appropriate amount of time, given the massive number of documents that need to be examined.
"It appears that SAP's been prepping TomorrowNow for a fresh start," says Ray Wang, principal analyst at Forrester Research. In fact, SAP admits in its corporate statement to be "considering several options for the future of the TomorrowNow business, including possible sale." Wang suggests that such a broad mandate could be met either by an outright sale or even by turning TomorrowNow into a separate division, one utterly independent of SAP.
At the moment, however, SAP claims to be focusing on existing clients. "Over the next days, we will be communicating with TomorrowNow customers about these [management transitions] and our plans to support them going forward," White said in a statement. Since assuming the position as TomorrowNow's executive chairman, White has primarily been responsible for making sure that "SAP is compliant in respecting intellectual property," Wang says, adding that "it's too early to tell" if White is actually proving himself to be an adequate replacement. Forrester Research has revealed that some of its customers reported receiving new client paperwork from SAP, "indicating a change in service agreements." The paperwork gives each party -- the customer as well as SAP -- 60 days to decide whether or not to commit to doing business under the new agreements.
Forrester Research continues to advise its clients that the incident with TomorrowNow should not dissuade them from pursuing the benefits generally achieved through third-party service providers for cheaper software-maintenance solutions. "Despite efforts by the major vendors to improve customer satisfaction, response times, and upgrade benefits," reports the research firm, "most customers continue to believe that they are not receiving value from the 2x to 2.5x they are paying in license fees over a 10-year period." In response to the traditionally high prices, third-party vendors are undeniably a preferred alternative. Forrester anticipates new IT players to save the day, giving customers more bang for less buck.
Forrester emphasizes other evidence of the vitality of third-party maintenance. Customers are already looking for alternative providers, such as Rimini Street, founded by TomorrowNow cofounder, Seth Ravin. (Rimini, in fact, has reportedly been making overtures about purchasing TomorrowNow from SAP.) Furthermore, many China-based software-development shops are now moving to provide third-party support as well, which will "provide some relief to the market," according to Forrester. The research firm suggests there may be upside potential in contracting with one of those Chinese firms, such as Augmentum, Achievo, Neusoft, or Worksoft. Forrester's position is that, as those firms "build their outsourcing capabilities, they will be best positioned to provide 3rd-party maintenance," and that those firms have a shrinking window of opportunity to provide that service independently "before they become enticed by Oracle and SAP" and get snapped up by one of those larger vendors, as TomorrowNow was.
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