Silly SAP, silly fine. Make sure we don't all pay the price
Time for some maturity among the leaders of enterprise IT companies
Published 17:58, 24 November 10
The ruling which gave Oracle £820 million in damages from SAP has potentially damaging implications for all enterprise IT customers, and it is in no one’s interests for it to stand.
Regardless of the rights and wrongs, and SAP clearly admitted it was in the wrong, the award bear no relation to any damage Oracle may have suffered through the actions of the now defunct SAP subsidiary TomorrowNow.
Larry Ellison was flying a kite when he told the court that it would have cost SAP $4 billion to license the software stolen by TomorrowNow. The judge in the case immediately threw out Oracle’s claim for $500m damages from lost cross sells and upsell opportunities. SAP itself suggested that an appropriate level of damages should be a few tens of millions of dollars.
Tobias Ortwein, of PAC Consulting, is right to say of the decision, “To Continental Europeans, the sheer amount of damages is disconcerting, the more so as it seems that this amount was determined with a certain degree of arbitrariness.”
He is also correct in his comments on the disparity in amounts being bandied about, “Being an outside observer,” he said “this suggests to me that in the course of the lawsuit, neither of the litigants was able to realistically quantify the damage caused.”
There is no question here of taking one side or another in this dispute. SAP admitted they were in the wrong and they should pay recompense, but we need some sanity.
My first response when I heard the scale of the award was does this represent the opening shots of a barely concealed trade war between the European Union and the US?
Remember the angry reaction in the US to the European Union investigations into Microsoft’s business practices? Remember the complaints by the US Department of Justice over payments the EU levied on Microsoft for abuse of its monopoly power?
Remember the angry reaction from US software houses every time the EU investigates a new mega-merger?
This is difficult enough territory anyway, without pouring fuel on the fire. The last thing IT professionals, IT companies, the economy and society more generally needs is open or covert restrictions on trade - whatever the excuse.
That is not all. It is time for enterprise IT users to start demanding the leaders of the giants which dominate the industry to behave like mature business people.
How could SAP allow itself to be dragged into this mess? Does Larry Ellison really think it is good for his company and his customers to taunt HP’s new CEO, the former SAP chief Leo Apotheker? What about Mark Hurd, HP’s handling of his case and the fact he is now at Oracle?
We are all accustomed to ferocious competition among IT firms, but this sort of behaviour does not endear itself to people who have invested their organisations and their careers in the products of these companies.
Enterprise IT customers want innovation, reliability, value for money, clear roadmaps and stable partnerships with their suppliers. They want their suppliers to be profitable, because that is the source of future development.
They also want suppliers to behave ethically and responsibly because many feel that a company which abuses one customer or partner (and let’s not forget that SAP, Oracle and HP are often partners), could well abuse them.
These aren’t trivial points. Oracle, among others, is trying to offer its customers a complete stack from hardware to databases to servers and storage. It has done a fantastic job of keeping onboard the customers it acquired through its merger spree. And according to the leaders of the UK Oracle User Group at least, its Fusion apps strategy is going to deliver big time when it is rolled out.
However, most IT organisations run a mix of hardware and software and will continue to do so. While some IT professionals may have tribal loyalties to one vendor or another, most understand the importance of cooperation as well as competition between vendors.
While some CIOs may be prepared to bet the shop on one supplier or another, many more will look to hedge their bets with the help of Cloud and SaaS.
If there isn’t a sensible agreement now the jury has ruled, and this case drags on through a prolonged appeal process, both sides will be diminished in the eyes of their customers.
Enterprise IT professionals are already pondering the direct impact of the outcome on their organisations. Most analysts agree that SAP can pay the fines without material harm to the business - though internal morale will suffer, partners will be anxious to protect margins and customers will be increasingly watchful that they are not being over charged - in effect to pay for the damages.
There is another threat too - and it goes beyond the ranks of Oracle and SAP users. That is to the growing trend among enterprises to opt for third party support for their systems. The cost of support from vendors is high and the vendors’ margins are enormous, which has driven increasing numbers of organisations to look for third party help.
IDC analyst David Bradshaw thinks the outcome of the Oracle-SAP case undermines that move and I think he is right. Ray Wang, who has long championed end users through his Enterprise Bill of Rights, believes the outcome will be less clear cut than Dave Bradshaw suggests, but he suggests on his blog there will be battles to come on this issue.
“So long clients demand for 3PM (third party maintenance) at the time of purchase, we still have an opportunity to push back on vendors. If we fail to do that and seek clarification at time of purchase, then we may have pushed the balance of power too far on the side of the software vendor. Ready to fight this battle on behalf of customers? I am.”
So is ComputerworldUK.
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