SAP Tuesday admitted that its TomorrowNow services subsidiary made some "inappropriate downloads" from an Oracle Web site but contended that SAP personnel did not access the material.

SAP admitted the downloads in today's response to a March 22 lawsuit by Oracle which alleged that TomorrowNow staff hacked into an Oracle support Web site and downloaded vast amounts of content, which was used to offer Oracle customers cut-rate support services.

In an about face from his previous position, SAP CEO Henning Kagermann said in a statement that his company is open to a possible settlement with Oracle, which has charged SAP with "corporate theft on a grand scale."

Rodney Masney, global director of IT infrastructure services at Owens-Illinois, an Ohio-based maker of packaging materials and an SAP shop, said he doesn't expect that the lawsuit will damage SAP's business. "It's important for customers of SAP to know they are dealing with a highly ethical organization," he said. "Ultimately, I believe this will blow over."

Masney, also president of the Americas' SAP User Group (ASUG), said that Kagermann offered assurances during a telephone conversation today that a thorough investigation would continue, and that "appropriate action" would be taken against employees involved in any theft of data.

In addition, Masney said that Kagermann said that there is "an appropriate firewall [between TomorrowNow and SAP] and no information fell into the hands of SAP employees. There were perhaps some procedures not followed and that significantly increased the amount of data downloaded [by TommorowNow employees]."

In its response, SAP also said that it has appointed COO Mark White executive chairman of TomorrowNow, and pledged to enforce both existing procedures, create new policies and implement special training programs for employees. Masney described White as a "very disciplined" executive.

Rebecca Wettemann, an analyst at Nucleus Research, criticized SAP officials for a lack of oversight. "The apology and response is too little too late," she said. "SAP customers should be concerned, in general, about their welfare given SAP management's apparent lack of oversight of its employees and lack of regard for intellectual property."

David Mitchell, an analyst at Ovum, said SAP must work hard to avoid damaging its reputation. "It is still likely that the case will continue through the legal process and that it may still have many months to run," he stated in a research note. "Irrespective of the legal conclusion to the case, a significant part of the impact for both Oracle and SAP will be related to how each manages the public relations impact"

Oracle released an e-mail statement Tuesday, noting that "Kagermann has now admitted to the repeated and illegal downloading of Oracle's intellectual property. Oracle filed suit to discover the magnitude of the illegal downloads and fully understand how SAP used Oracle's intellectual property in its business. To the extent requested, Oracle will cooperate with the Department of Justice investigation of SAP announced by the company in its press release."

(Dan Nystedt and China Martens of the IDG News Service contributed to this story)