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Oracle lawsuit escalates battle with SAP

Analysts expect customer fear and uncertainty

By and , Network World
March 22, 2007 06:26 PM ET

Network World - Oracle’s lawsuit accusing rival SAP of stealing proprietary information is a serious escalation in the battle between the software giants that may create fear and uncertainty among customers, some analysts say.

“Clearly it’s a very fierce rivalry that just keeps getting ratcheted up,” says James Kobielus, principal analyst for data management at Current Analysis. “It’s not surprising they’ll continue to duke it out with each other through all available channels. … Oracle has made no bones about the fact that it covets SAP’s primary standing in the business application market. SAP clearly feels the threat from Oracle on that front.”


Read Paul McNamara's blog on the lawsuit and add your comments.


Oracle today accused SAP and its TomorrowNow subsidiary of engaging in “systematic, illegal access” to Oracle’s computerized customer support systems. TomorrowNow provides third-party maintenance and support in large part for Oracle applications drawn from its PeopleSoft, Siebel and JD Edwards product families.

Oracle’s lawsuit defends against TomorrowNow “looking to undercut a major revenue stream by offering half-rate support,” writes Martin Schneider, an analyst at 451 Group. But Oracle has done the same in the past, he writes in analysis issued in response to the lawsuit.

“It is interesting that Oracle has been guilty of the same kind of activity with its recent underselling of RedHat Linux support,” Schneider writes. “But since the JDE and PeopleSoft products are under proprietary licenses, Oracle has much more legal recourse than RedHat. But we wonder how much (Oracle) IP SAP did gather that is really hard to come by, since most of the later PeopleSoft bug fixes and patches were built using the open source Eclipse toolkit.”

Oracle’s lawsuit claims that SAP illegally accessed and downloaded more than 10,000 pieces of Oracle IP off its customer portal, Schneider notes.

Kobielus called the lawsuit a “distressing new development” in the rivalry between the top two players in the applications market.

“It introduces fear, uncertainty and doubt on all sides of the equation, both among Oracle’s customers and SAP’s customers,” he says. “Whether it substantially makes any change in either of the vendors’ value propositions or competitiveness in the market, no it doesn’t. Vendors sue each other all the time… over various matters.”

The impact on customers of the two companies “will vary,” says Rich Ptak, a founder and principal analyst with Ptak, Noel & Associates. “I don’t think it will be great for either of them.”

The charges against SAP, if true, could be “pretty devastating,” Ptak writes in an e-mail. “It is rare that you get the accusation. It is even more rare that you would see actual criminal activity.”

The lawsuit illustrates the importance of third-party maintenance as a revenue stream, notes Ray Wang, principal analyst with Forrester Research.

“SAP through TomorrowNow [a wholly-owned subsidiary of SAP] has been offering Oracle customers third-party maintenance support,” Wang says. “One key thing here is that third-party maintenance is becoming a sensitive topic. As software companies become heavily dependent on recurring services revenue, any success by third-party maintenance providers will give one vendor an advantage over another by cutting off that funding.”

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