SAP is going to kill off its ill-fated TomorrowNow acquisition by winding down its remaining application support operations by the end of October.
SAP is locked in a bruising legal battle with Oracle, which claims that TomorrowNow illegally downloaded copyrighted Oracle product support documentation and code.
However, the decision to close down the remaining TomorrowNow doesn’t mean that there is any active effort between the two companies to settle the lawsuit. The case is scheduled to go to trial in February 2010, and the adversaries haven’t made any move toward resolving the suit in court-ordered settlement conferences. SAP has said it will pursue a vigorous defense against this lawsuit.
The next settlement conference is scheduled for Oct. 6.
While SAP says that the shutdown won’t have any material effect on its financial results, this acquisition has certainly produced nothing but losses for the company since it bought the company in February 2005.
It looks like the financial pain is destined to get much worse. SAP has publicly conceded that its TomorrowNow subsidiary had downloaded documentation that it wasn’t authorized to access. However, SAP contends it never itself accessed this information or benefited from it.
But Oracle has since amended its lawsuit filed in the U.S. District Court in San Francisco to add patent infringement and breach of contract charges. It looks like Oracle has a winning hand in this lawsuit, and it could cost SAP many millions of dollars to settle it, whether or not the case actually goes to trial.
SAP hasn’t had good luck recently winning lawsuits. At the end of June supply chain software maker i2 Technologies announced it would receive an $83 million cash payment from SAP to settle a patent infringement lawsuit.
SAP announced its shutdown of TomorrowNow a week after announcing that it was moving its own support and maintenance services to a single-tier “Enterprise Support” system for all customers regardless of their size and IT budget. The new program is going to result in higher support costs for most customers as it is phased in over the next four years.
My boss, eWEEK Executive News Editor Michael Hickins, wrote in his E-piphanies blog that the TomorrowNow debacle, like the decision to move to a higher-cost Enterprise Support program, will only serve to push customers to third-party application maintenance and support services.
SAP to Help Transition TomorrowNow Customers
SAP says it will work with TomorrowNow’s remaining 225 customers to transition them to Oracle support or to other third-party support services.
“We will look at each customer’s needs and work with each of them to help them choose their best options” for application support, said SAP spokesperson Saswato Das.
“We intend to have all of them transitioned by Oct. 31,” which is SAP’s target date for winding down TomorrowNow’s operations, Das said.
SAP expects that shutting down TomorrowNow will have no material effect on SAP’s financial results, Das said.
SAP acquired TomorrowNow in February 2005 after Oracle completed its acquisition of PeopleSoft, one of the top makers of ERP application software. SAP saw an opportunity in providing an alternative third-party application support service to PeopleSoft customers who didn’t want to buy support services directly from Oracle.
Oracle warned SAP at the time of the acquisition that it would be watching to make sure that TomorrowNow didn’t violate any of its intellectual property rights. Oracle filed suit in March 2007, saying that it had observed TomorrowNow accessing its servers to download massive amounts of its copyrighted documentation.
SAP started winding down TomorrowNow’s operations in November 2007 when it warned TomorrowNow customers that they had to move their support applications off TomorrowNow’s computers in its data center and shift them to their own computers or some other data center.
