SAP In a World of Trouble?

TomorrowNow means trouble today for SAP.
>By luck or design, SAP aired some very embarrassing news on one of the slowest news weeks of the year. The enterprise software giant admitted that its TomorrowNow (TN) subsidiary, engaged in "inappropriate" downloads of Oracle support materials.

SAP CEO Henning Kagerman insisted the "majority" of the more than 150 complaints in Oracle's suit were "unfounded." But SAP's battle with Oracle appears far from over.

Oracle (Quote) has accused SAP of corporate theft "on a grand scale" in a 44-page complaint. SAP said any illegal access to or misuse of Oracle's copyrighted material was limited to it TN subsidiary and not SAP corporate or other related entities.

SAP had not responded in any detail for months to Oracle's initial charges, made back in March, and updated in June, other than to promise a vigorous response.

But analysts contacted by give SAP credit for airing the results of its internal investigation, however late, and moving to resolve the issue. "Even a single inappropriate download is unacceptable from my perspective. We regret very much that this occurred," said CEO Kagermann in a statement.

Sageza Group president Clay Ryder draws comparison's to the HP pretexting scandal as a template for SAP.

"A lot of times the real test is how an issue like this is addressed, not what happened in the first place," said Ryder. "HP (Quote) dealt with the issue. SAP (Quote) is starting down that road, by admitting something bad happened and saying they're taking steps to insure it never happens again. If SAP handles this properly, and there are no further revelations, we won't be still talking about this in any significant in 2008. But if there's another breach of this kind, it would be disastrous to SAP."

TheInfoPro analyst Bob Gill thinks the case, pending any further revelations, will have minimal customer impact. "Most of these kind of things are blips on the radar for most customers," Gill told "As long as the vendor still delivers the products and services at the price and time it's promised, customers don't really care. Look at HP which weathered the whole pre-texting mess beautifully."

SAP will have to weather some very sweeping charges. Oracle's complaint states that "SAP has compiled an illegal library of Oracle's copyrighted software code and other materials. This storehouse of stolen Oracle intellectual property enables SAP to offer cut rate support services to customers who use Oracle software, and to attempt to lure them to SAP's applications software platform and away from Oracle's."

Still, Pund-IT analyst Charles King thinks SAP's admission of some guilt is a first step to a legal settlement with Oracle. "From the Oracle side, it's going to be difficult to quantify financially what damage was done by the downloading of SAP's content," said King. "Can Oracle show how many page views customers made of the material and how that detracted from Oracle's business? That sounds like a pretty esoteric conversation."

For now, King thinks Oracle is enjoying the opportunity to tweak its arch rival. "It's always a moment for celebration when a major competitor steps into a mud puddle," said King. "But I think there will be a settlement."

SAP also has the U.S. Department of Justice on its back. Kagerman acknowledged the DoJ has requested documents related to Oracle's charges. "They asked for certain SAP internal documents and that is all so far," he said, adding the company would fully cooperate with the DoJ.

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