SAP sues Siebel again

SAP America is taking Siebel Systems to court again in an attempt to claim ownership over the strategic, inside information that SAP employees are exposed to in the course of doing business.

This latest lawsuit focuses on individuals now working for Siebel: Andrew Zoldan, a former vice president for the New Dimension product line at SAP; and Narina Sippy, the former vice president of corporate communications at SAP America. They are named in the suit, filed with the US District Court in Philadelphia.

Officials at Siebel confirmed that SAP America has taken this latest legal step, but they declined to comment on specifics. "We believe the suits are without merit," said a representative of Siebel. Officials at SAP America did not return phone calls by press time.

Topping a long list of SAP departures, the Siebel employee roster now includes Paul Wahl, the former CEO of SAP America, who became president and chief operating officer during the first half of this year; and Jeremy Coote, former president of SAP America who holds the post of vice president of North American operations. SAP previously has taken legal action this past summer and fall to stop Siebel from allegedly poaching senior staff. SAP also has lost staff to IBM, Oracle, I2, and dot-com electronic businesses.

The lawsuit alleges that Zoldan and Sippy pose a threat to SAP primarily because they were privy to confidential information that, when used in a competitive situation, puts SAP at a disadvantage. In particular, SAP alleges that they have inside information on SAP's mySAP.com offering. To amend this situation, SAP wants Sippy and Zoldan to stop working for Siebel for two years.

Analysts say this latest legal effort - especially with the focus on trade secrets - will be a tough case for SAP to win. SAP's case, however, might be strengthened if it can prove that there is direct competition between the company and Siebel, particularly in the realm of customer relationship management (CRM) applications, said analyst Hugh Bishop, senior vice president at the Aberdeen Group.

By offering a variety of application suites - from its flagship ERP packages to mySAP.com, which combines aspects of supply-chain management, ERP, CRM, and hosting services - it is possible that direct competition exists, said Analyst David Boulanger, research director at AMR Research. "It all depends how you slice up the market," he said.

Filing the case also could be useful as a tactic by SAP to stem the executive exodus from the US-based division of SAP, Bishop said. Siebel has picked up quite a few executives from SAP over the last year, said Bishop, adding that "it's quite a coup for Siebel." Siebel lured SAP staff away with good packages and attractive stock-ownership deals, which may be the main reason SAP's ranks have been thinning.

"They [SAP officials] literally don't believe in a stock-option plan," Boulanger said. "In essence, the Germans haven't quite gotten it yet."

Although a stock-option plan is being considered by SAP for senior managers and directors, the company may need to go further, Boulanger said. "It's a good first step, but they need to extend it to the rank and file," he said.

Instead of doing battle in the courtroom, it might be better for SAP to focus on "competitive pressures that are putting SAP in the hot seat," Boulanger said. Five years ago when there were four or five strategic vendors to choose from, SAP used to be able to dictate policies and strategies to its major corporate customers; but times have rapidly changed, he said. There are approximately 20 strategic suppliers that are competing for CIO mind share. "The relative importance of SAP has changed over time," he said.

What also has changed is that in the US software market, competitors can quickly become collaborators with so many players changing chairs so often. Thus, SAP's attempt to control the trade secrets that employees take with them is "out of the norm" for what happens in the U.S. marketplace, Boulanger said. "This is a very European way of looking at the world," he said. Often, among U.S. software companies, knowledge of product and business strategies leaves with the employees. "It's a fact of life," he said.

"You can't pull the brain cells out of their ears as they leave," Aberdeen's Bishop said.

Given the good shape of the economy and the highly competitive nature of the software industry, Boulanger said he expects the SAP departures to continue, in spite of the legal actions. "My nagging suspicion is that this is the tip of the iceberg," he said.

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