Verdict in Oracle-SAP suit poses threat to IT

Customers fear acrimony could hurt sites using both vendors' software; analysts predict problems for third-party support industry

Last month's federal jury verdict awarding Oracle Corp. $1.3 billion in its corporate theft lawsuit against SAP AG could prove harmful to both enterprise users and third-party support providers, analysts and IT executives say.

Oracle filed the lawsuit against SAP in 2007, charging the German vendor's now-shuttered TomorrowNow subsidiary with the electronic theft of "thousands of proprietary, copyrighted software products and other confidential materials" used by Oracle's support organization.

SAP indicated that it will appeal the award, which several analysts called excessive in light of the small size of TomorrowNow.

"The business that they were in was to fix glitches in [Oracle] software and make some compliance updates," said Paul Hamerman, an analyst at Forrester Research Inc. "They weren't trying to resell any of the software that they were downloading."

Continuing acrimony between Oracle and SAP could cause significant problems for the many enterprise IT operations that run a mix of products from both suppliers, said John Glanville, IT director at Ideal Stelrad Group Ltd., a U.K.-based heating and boiler company.

"SAP's engagement with Oracle appears to be widening, and yes, this has to be a concern," Glanville said. There is an "ever increasing need" for the products to work together so that IT departments can "develop solutions quicker, more robustly and with infinite scale. Business etiquette has to prevail," he added.

Frank Scavo, managing partner of Strativa Inc., an IT consulting firm in Irvine, Calif., speculated that the excessive damages award could blunt the willingness of third-party support providers to offer the pricing and other advantages they extend today.

"Some of us have been advocating for software customers' rights to receive legitimate third-party support as a counterweight to the OEM's ability to charge unreasonable fees for maintenance," Scavo said.

Ronan Miles, chairman of the U.K. Oracle User Group and director of customer innovation services at BT Group PLC's Global Platforms group, said the verdict should immediately prompt businesses using non-vendor-supplied support services to "ensure that those third parties engage fairly with Oracle."

The 11-day trial in an Oakland, Calif., federal courthouse captivated Silicon Valley with the drama of a battle between the world's two biggest business applications software vendors.

Well-known executives like Oracle CEO Larry Ellison, Oracle co-President Safra Catz and SAP co-CEO Bill McDermott appeared in the witness box. Spectators included an FBI agent who said the agency has "an interest in the case," and Kyle Waldinger, an assistant U.S. attorney based in San Francisco.

SAP in August had already agreed to assume liability for Oracle's copyright theft claims, and in court the company estimated that it owed Oracle $40 million. Ellison testified that SAP should pay up to $4 billion to cover the cost of the stolen software.

The jury was given wide latitude in deciding on the amount of damages to award and apparently bought Oracle's argument that SAP should have to cover the cost of a "hypothetical license" -- or whatever it would have had to pay Oracle to license the stolen software at fair market value.

Jaikumar Vijayan covers data security and privacy issues, financial services security and e-voting for Computerworld. Follow Jaikumar on Twitter at @jaivijayan, or subscribe to Jaikumar's RSS feed . His e-mail address is jvijayan@computerworld.com.

James Niccolai of the IDG News Service and Leo King of Computerworld UK contributed to this story.

Copyright © 2010 IDG Communications, Inc.

7 inconvenient truths about the hybrid work trend
Shop Tech Products at Amazon