Oracle, SAP and the case of the


So Oracle Corp. has accused SAP AG of software theft on a grand scale.

A great deal of ink has already been expended on this issue, that’s become a really hot discussion topic, in articles, blogs, message boards, podcasts et al.

Indeed, as some have commented, the 44-page complaint filed by Redwood Shores, Calif.-based Oracle before the District Court in San Francisco is itself quite a page turner – replete with dramatic “disclosures”, graphic descriptions, and powerful rhetoric.

Here’s a capsule of the main allegations:

Oracle claims SAP responded to its 2004 purchase of PeopleSoft, by acquiring Bryan, Texas-based TomorrowNow Inc. (a third-party provider of software maintenance and support for PeopleSoft, J.D. Edwards, and Siebel applications) – and then embarked on a systematic and concerted effort to woo away Oracle’s support customers.

Nothing wrong with that except that – according to Oracle – the means SAP used to achieve its goal were flagrantly illegal.

SAP, the complaint says, “copied and swept thousands of Oracle software products and other proprietary materials on to its own servers.”

The suit claimed that by “illegally” acquiring this storehouse of proprietary material, SAP is able to “offer cut-rate support services to customers who use Oracle software and lure them into SAP’s applications software platform and away from Oracle.”

And, how – according to the Oracle complaint – did SAP/TomorrowNow employees manage to accomplish such prodigious pilfering of proprietary software? By “using the log in credentials of Oracle customers with expired or soon to expire support rights.”

For instance, Oracle’s complaint alleges SAP used the credentials of a particular customer (who, typically, averaged 20 downloads a month) to copy more than 1,800 pieces of software every day for four consecutive days.

Commentary on this on this issue has been vast and varied, but viewpoints expressed broadly fall under three categories:

• There are those who believe it’s really much ado about nothing – that Oracle, even if its allegations are true, is blowing completely out of proportion what is probably just overzealousness on the part of some SAP employees, or at most a misdemeanor, or an error of judgment;

• At the other end of the spectrum are commentators who hold that Oracle has an excellent case, which if true, leaves SAP with a lot to answer for. Many in this group are curious to see how SAP will get out of this one;

• And then there are others who say the question of whether Oracle has a case or not is inconsequential; the real interest of this case, they say, is in the larger issue it points to: the phenomenal shift in the enterprise software industry, where ongoing maintenance revenues count far more today than license sales or market share.

All observations – mine included – must take into account one vital fact: that Oracle’s allegations, so far, are just that – allegations that are as yet unproven.

That said, I don’t believe the actions Oracle cited its complaint (specifically, the alleged swiping of vast quantities of proprietary software by providing false credentials) can be minimized or dismissed as misdemeanors on the part of an overzealous support staff.

For instance, one observer suggests that if SAP (and specifically TomorrowNow’s) staff really did access Oracle’s database it’s because the passwords were given to them by existing or former Oracle customers, who were migrating to SAP.

He speculates that the idea was probably to make the transition easy, and this should be seen more as “an act of convenience than an earth shattering act of corporate espionage.”

This is not the action of someone “trying to steal code that they’ll [then] sell for millions on the black market. That sounds more like a tech support professional, who sees a lot of tech support documents and files that he…should download now, just in case it will help the customer at a later date.”

The fact is maintenance support today is really a multi-million dollar market today – and ISVs are savagely battling for a piece of this market, for several reasons. According to some estimates, maintenance revenues carry gross margins in the 80 per cent range.

In addition, being an annuity – typically, 20 to 25 per cent of the license fee – maintenance doesn’t have to sold year after year, it’s recurring revenue that vendors can count on.

Creating comprehensive support resources – online knowledge databases, libraries, technical notes, other software products, patches, software documentation et al – requires time, effort and money, a great deal of it. And these costs are factored into the final price the ISV charges for support.

If by some means another vendor gains access to these resources – and then uses them to offer support to its competitor’s customers at bargain basement prices – I wouldn’t characterize that as “just a misdemeanor.”

“But hold your horses”, some would argue. “Isn’t Oracle doing the very same thing by offering full support to Red Hat customers? Isn’t Oracle also piggybacking on Red Hat’s labour and brand, rather than building its own distribution? And was it a gauche attempt to decimate Red Hat, rather than an initiative to promote Linux?”

All of the above is probably true. But the bottom line is you really can’t compare large-scale pilfering of proprietary code (if that’s what really occured) to taking source code that’s publicly accessible under GPL and building a product or service around it.

After all, are not several outfits, including CentOS and many others, rebuilding Red Hat Enterprise Linux variants from source code components released by Red Hat?

Whatever position we take on this issue, there’s no question that this latest Oracle-SAP clash is no run-of-the-mill squabble between competing enterprise software vendors.

The entire industry will be closely watching the progress of this case. For on its outcome will depend the future of maintenance contracts – and potentially the destiny of the major players in the enterprise software space. A quote by Forrester Research analyst Ray Wang says it all, “This is about more than just protecting intellectual property. This is about product support and the art of war.”