SAP boss will not settle with Oracle

SAP AG has no intention of settling with Oracle Corp. over its trade secrets lawsuit filed last month, and will begin to launch its defence in the coming weeks, SAP CEO Henning Kagermann said on Friday.

“We have no intention to settle; why should we?” a defiant Kagermann told reporters and analysts during SAP’s quarterly earnings call Friday. “We don’t think anything is wrong in our company.”

“We have a long legacy at the company, with an unparalleled reputation as a trusted advisor and a trusted partner,” Kagermann said. “We believe in the importance of intellectual property rights and we will aggressively defend against the claims made in this lawsuit.”

“However,” he added, “this lawsuit is still in its early stages and we will formally respond to these claims within the next weeks.”

His comments set the stage for what could be a lengthy battle with Oracle in the U.S. courts.

Oracle filed suit against SAP on March 22, accusing it of “corporate theft on a grand scale.” Workers at SAP’s TomorrowNow Inc. subsidiary in the U.S. allegedly hacked into an Oracle database and stole documents and software that Oracle uses to provide support service for its clients.

SAP, said Oracle’s complaint, “copied and swept thousands of Oracle software products and other proprietary materials on to its own servers.”

The suit claimed that by “illegally” acquiring this storehouse of proprietary material, SAP is able to “offer cut-rate support services to customers who use Oracle software and lure them into SAP’s applications software platform and away from Oracle.” The complaint accused SAP/TomorrowNow employees of pilfering Oracle’s proprietary software by “using the log in credentials of Oracle customers with expired or soon to expire support rights.”

For instance, Oracle’s complaint alleges SAP used the credentials of a particular customer (who, typically, averaged 20 downloads a month) to copy more than 1,800 pieces of software every day for four consecutive days.

The case has sparked much discussion in the industry – with commentary running the gamut of views.

Some have expressed the view that it’s really much ado about nothing – that Oracle, even if its allegations are true, is blowing completely out of proportion what is probably just overzealousness on the part of some SAP employees, or at most a misdemeanor, or an error of judgment. At the other end of the spectrum are commentators who hold that Oracle has an excellent case, which if true, leaves SAP with a lot to answer for. Many in this group are curious to see how SAP will get out of this one.

There are others who say the question of whether Oracle has a case or not is inconsequential; the real interest of this case, they say, is in the larger issue it points to: the phenomenal shift in the enterprise software industry, where ongoing maintenance revenues count far more today than license sales or market share.

With maintenance support today a multi-million dollar market, ISVs are savagely battling for a bigger market share, for several reasons.

According to some estimates, maintenance revenues carry gross margins in the 80 per cent range.

In addition, being an annuity – typically, 20 to 25 per cent of the license fee – maintenance doesn’t have to sold year after year, it’s recurring revenue that vendors can count on.

SAP had not commented on the lawsuit until now, except to say it would defend itself aggressively. Earlier Friday, SAP reported a 10 percent jump in its first-quarter profit, helped by increased sales of its software and support services. Net income for the quarter was Can$465 million as of March 31, the last day of the period reported, up from $432 million a year earlier. Total revenue climbed 6 percent to $3.3 billion.

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Jim Love, Chief Content Officer, IT World Canada

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