E-Commerce News: Deals: SAP May Boot TomorrowNow ASAP

SAP May Boot TomorrowNow ASAP

By Erika Morphy
CRM Buyer
Part of the ECT News Network
11/20/07 1:56 PM PT

Facing an ugly legal battle with competitor Oracle, SAP is considering the sale of its subsidiary TomorrowNow. The third-party support vendor is the subject of a lawsuit brought by Oracle claiming SAP used the company to conduct corporate espionage. SAP has been distancing itself from TomorrowNow, noting that it is a separate and distinct entity.

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SAP (NYSE: SAP) may be putting TomorrowNow on the block. SAP acquired the company, which services Oracle (Nasdaq: ORCL) subsidiaries PeopleSoft and JD Edwards, a few years ago as part of a larger drive to build out an independent stream of support and maintenance revenue.

Relying on third party service and maintenance is a well established strategy among enterprise vendors, Roger Kay, principal and founder of Endpoint Technologies, told CRM Buyer. Outsourcing such functionality, "is an increasingly popular business model because of the high margins that can be realized," besides allowing vendors to concentrate on the core competency of designing software.

Lightening Rod

Whether SAP has realized its original goals with the TomorrowNow acquisition, though, is unclear. What is certain, however, is that the firm has become a lightning rod of controversy for SAP. The actions allegedly taken at this subsidiary is the focus of an upcoming suit against SAP by Oracle, who is charging that SAP has engaged in corporate espionage through this subsidiary.

Indeed, given the baggage that accompanies TomorrowNow, Kay speculated that SAP will likely have a difficult time selling it off.

"It will have to be a buyer with big cojones," he said, noting Oracle CEO Larry Ellison's propensity to play rough.

The Suit

Oracle filed suit against SAP and TomorrowNow in March, alleging some 10,000 technical documents from Oracle's Customer Connection -- a service for Oracle licensed customers with active support agreements -- had been illegally downloaded from the TomorrowNow offices. These materials apparently included program and software updates, bug fixes, patches, custom solutions and instructional documents for the PeopleSoft and J.D. Edwards family of software products, according to Oracle.

The point of the incursion, Oracle charged, was for SAP to gain the necessary documentation to better service customers that it hoped to lure away from Oracle.

In various statements and court filings, SAP tacitly acknowledged there is truth to Oracle's claims -- but it has put a different interpretation on its actions. One argument it put forth is that TomorrowNow was authorized to download documentation. SAP has also maintained that it took steps to keep the information in TomorrowNow's systems separate from its own. Finally, SAP has distanced itself from TomorrowNow, noting that it is a separate and distinct entity.

Those arguments will be tested in due time. Judge Martin Jenkins of the U.S. District Court in the Northern District of California assigned a trial date of Feb. 9, 2009, with four weeks set aside for the event.

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