TomorrowNow resignations won't affect SAP's business

SAP says its business as usual, but the episode has caused a mixed reaction in the industry.

SAP announced yesterday the resignation of several senior managers of its troubled subsidiary TomorrowNow, including CEO Andrew Nelson.

The episode has evoked a mixed reaction in the industry.

While announcing that Nelson and several members of his team had quit, SAP said it is "considering several options for the future of the TomorrowNow business, including possible sale."

Texas-based TomorrowNow was set up to provide Oracle customers with software maintenance support -- and it did so at a much lower price than what Oracle offered.

The company came into the spotlight in March when Oracle filed a lawsuit against it (also naming SAP as a defendant). The lawsuit accused SAP and TomorrowNow (SAP TN) of "corporate theft on a grand scale."

While the legal battle continues -- the resignations of senior TomorrowNow execs, including its CEO is seen by one Canadian analyst as SAP just looking to put an unpleasant episode behind them.

"SAP is the biggest company in the [enterprise software] space -- and the last thing they need is something tarnishing their reputation," said Joel Martin, vice-president of enterprise software research at analyst firm, IDC Canada in Toronto. However, he said it's unlikely the TomorrowNow episode will affect SAP's business in any significant way.

Meanwhile, SAP, when contacted, had very little to add to its statement.

"The litigation remains ongoing and a settlement conference is scheduled for October 2008, where the parties are encouraged to discuss options, including settlement, with a Magistrate Judge," said Andy Kendzie, Executive Director, SAP America Media Relations in an e-mail sent to ITBusiness.ca.

"As there is active litigation, we cannot discuss this in any further detail," he said.

IDC Canada's Martin noted that maintenance revenues are "very near and dear to the enterprise software vendor's heart", and any threat to those revenues by a competitor could potentially spur litigation. He said TomorrowNow "must have been [affecting] US-based revenues for some of Oracle's core products."

In its lawsuit Oracle claimed SAP TN, repeatedly and without authorization, accessed Oracle's proprietary, password-protected customer support Web site. From that site, it said, "SAP copied and swept thousands of Oracle software products and other proprietary and confidential materials onto its own servers."

"As a result, SAP has compiled an illegal library of Oracle's copyrighted software code and other materials."

The suit -- filed in the U.S. District Court in San Francisco -- threw into sharp focus the crucial and growing importance "maintenance revenues" in the enterprise software space.

There's little doubt that -- until Oracle's suit -- TomorrowNow's business was a runaway success. Oracle and SAP offer very different perspectives on the reasons for this success.

Oracle, in its suit, suggested that SAP TN was able to "offer cut rate support" to Oracle customers was because it pilfered Oracle intellectual property. However, SAP in its online FAQ on the lawsuit submitted that Oracle customers have "long sought" less expensive support alternatives than what Oracle offers.

Essentially, the SAP document attributes TomorrowNow's growth to a superior, yet cheaper offering.

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