Oracle Sues SAP
Oracle took its rivalry with SAP to court on Thursday, filing a suit against SAP alleging violations of U.S. fraud legislation, unfair competition, and civil conspiracy. Oracle filed the lawsuit against SAP, its SAP America division, and its TomorrowNow subsidiary, in U.S. Federal District Court in the Northern District of California. Oracle is also filing suit against 50 unnamed individuals who it claims were employees of SAP and whose identities the vendor hopes to determine during the course of the lawsuit.
Oracle has spent more than $20 billion on acquisitions over the past three years to grab more of the market. As part of SAP's counterattack, the suit alleges, it has been illegally building a library of Oracle's computer code so it can woo away some of Oracle's customers. "This case is about corporate theft on a grand scale," states the lawsuit. Oracle alleges it has discovered that SAP is "engaged in systematic, illegal access" to Oracle's computerized customer support systems. "This theft appears to be an essential--and illegal--part of SAP's competitive strategy against Oracle," the complaint stats. SAP was still reviewing the lawsuit and had no comment, according to company spokesman Steve Bauer.
Oracle alleges that most of the clandestine activity was carried out by TomorrowNow, a Texas software support service that SAP bought in 2005, shortly after Oracle completed its takeover of PeopleSoft for $11 billion. TomorrowNow was formed by a group of former PeopleSoft engineers, and Oracle alleges that TomorrowNow couldn't match the technological prowess of Oracle. To compensate, Oracle alleges, TomorrowNow broke into its computers last year, and between September 2006 and January 2007, made more than 10,000 illegal downloads of material about the copyrighted software that Oracle bought in the PeopleSoft deal. As part of its ploy, the lawsuit alleges, users on TomorrowNow computers posed as Oracle customers, including Honeywell International, a technology and manufacturing giant that serves the aerospace, construction, and automotive industries, and Merck.
At its heart, the lawsuit is about software maintenance contracts, says Ray Wang, a principal analyst at Forrester Research. "This is totally about third-party maintenance," he says. "If Oracle wins, this decimates the third-party maintenance market."
To provide support services to users of Oracle software, SAP's TomorrowNow requires access to certain Oracle technology to serve its customers. "Oracle appears to be taking issue with how TomorrowNow acquires that information," Wang says. With the market for software maintenance growing about 9 percent per year, compared with software licensing revenue growing closer to 7 percent, there's good reason companies are fighting over software maintenance, Wang says. Both SAP and Oracle are involved in delivering third-party maintenance services, with product support and software updates accounting for half of Oracle's $12.2 billion in revenue through the first nine months of its current fiscal year. Through a partnership with Systime, Oracle offers some maintenance for users of certain SAP products. However, SAP has been more successful moving Oracle customers onto its maintenance plans than Oracle has been doing the reverse, according to Wang.
Denis Pombriant, managing principal of Beagle Research, thinks it's unlikely that top-level SAP management had anything to do with the alleged actions by TomorrowNow, and says this might be a case of an SAP subsidiary, or a group of employees, "leaving the reservation." However, with the relationship between Oracle and SAP as contentious as it is, "nothing would surprise me," he says. If SAP did want to obtain proprietary Oracle materials for disreputable purposes, Pombriant says doing it through TomorrowNow would be "an ideal front."
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