Senior research analyst, Info-Tech Research Group

SAP AG’s announcement it will shut down operations of its TomorrowNow subsidiary won’t leave PeopleSoft or Siebel users out in the cold, a Canadian analyst says.

TomorrowNow Inc. of Newton Square, Penn., which SAP of Walldorf, Germany acquired three years ago, will cease to operate after October. It provides support for enterprise software from PeopleSoft, Siebel, JDEdwards and Baan.

“It gave a choice for PeopleSoft customers to have a more cost effective maintenance offering,” said Vinay Nair, research manager for Canadian enterprise applications research at IDC Canada. “Maintenance is a high expense item for a lot of customers and they would like to have that choice.”

He added some customer may wind up turning to Oracle for support.

“TomorrowNow has been the most established of the third party support providers,” said George Goodall, senior analyst for London, Ont.-based Info-Tech Research Group.

But he noted an Info-Tech report published last year cited several other third-party support providers, including Covansys, CyberSoft, Rimini Street and netCustomers.

“They’re not the only player on the street,” he said of TomorrowNow.

Oracle Corp. sued SAP last year, alleging in the United States District Court for the Northern District of California that TommorrowNow illegally accessed Oracle’s customer support systems and stole both software and confidential materials.

SAP admitted TomorrowNow had made some “inappropriate downloads” but denied the company engaged in corporate theft and refused at the time to settle.

A trial is scheduled in February, 2010, and a discovery board is scheduled Thursday of this week.

But SAP announced Monday it has “chosen to wind down operations” at TomorrowNow, and is “working with” its 225 customers to “help them return to support from Oracle” for its PeopleSoft, JDEdwards and Siebel applications.

Oracle bought PeopleSoft in 2004 and Siebel in 2005.

In its statement of claim filed in March, 2007, Oracle alleged SAP had committed 10 offences, including copyright infringement, violation of the Computer Fraud and Abuse Act, breach of contract, unfair competition and trespass to chattels. Oracle claimed SAP made more than 10,000 illicit downloads from its Customer Connection program and downloaded software and support materials “in the purpose name of customers that had never licenced those products.”

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SAP admitted last year TomorrowNow had made “some inappropriate downloads of fixes and support documents” but that the parent company did not have access to it. A series of discovery motions a case management conferences followed, but earlier this year SAP complained the cost of document discovery would be $16.5 million.

Judge Elizabeth Laporte agreed the cost was “onerous,” so on July 3, she issued an order limiting the number of custodians involved in the discovery and said the parties should examine documents through sampling techniques, with a vie to extrapolating “the extent of illegal activity and associated damages.”

SAP does not track the number of Canadian firms using TomorrowNow, said Saswato Das, SAP’s director for global communication.

An Oracle spokesperson Wednesday declined to comment to ComputerWorld Canada.

Goodall said the shutdown of TomorrowNow won’t end SAP’s legal troubles.

SAP’s action will demonstrate to the court they’re taking some sort of action but Oracle will still want some remuneration for damagesGeorge Goodall>Text

“SAP’s action will demonstrate to the court they’re taking some sort of action but Oracle will still want some remuneration for damages,” he said. “What’s happened here is SAP mis-stepped a little bit. It’s been a litigation nightmare for them.”

Nair agreed.

“Definitely SAP wants to clear its name,” he said. “I’m sure they want to wash their hands of that particular scandal”

Last November, SAP announced the resignation of TomorrowNow’s management team, and said it was considering selling the company. Both moves were seen as ways for SAP to distance itself from the activities of its subsidiary and clean up its reputation.

In the end, arranging a sale proved too much of a challenge.

“We carefully considered many options for selling TomorrowNow, but it would have been an extremely complex transaction for both the seller and the buyer,” Das told IDG News Service. “We chose to wind down operations instead.”

Das would not comment on what effect the closure of TomorrowNow might have on the case. SAP expects the cost of winding down operations at TomorrowNow to be “immaterial,” he said.

SAP aims to make the switch in support provider as smooth as possible for TomorrowNow’s 225 customers, around 70 of whom are also direct customers of SAP, Das said.

“We are working with each customer individually to help them choose their best option, including choosing Oracle support. Some can go to other third-party support,” he said.

Despite abandoning the market, SAP still sees a role for third-party software support.

“We believe the third-party maintenance market has its strongest appeal to customers using software that is considered end-of-life or obsolete, which does not apply to the bulk of SAP software,” SAP said.

But getting into the business may not have been such a great move for SAP, because TomorrowNow focussed on taking business away from Oracle rather than developing software sales for SAP, Nair said.

“The acquisition of TomorrowNow was really SAPs’ competitive attack on Oracle and it didn’t really support the business goals of SAP.”

–With files from Peter Sayer

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