Oracle App Users Group Analyzes $1.3B SAP Judgment

ANALYSIS: The users group president says there are several lessons to be learned by the record-setting court judgment.

The recent federal intellectual property case that resulted in a record-setting $1.3 billion judgment to Oracle for software and documentation misdeeds by SAP appears to have caused a far-reaching effect on the IT business.
Oracle, in a lawsuit originally filed in 2007, claimed that SAP-through a now-defunct affiliate division-illegally downloaded more than 8 million instances of its customer-support software and hundreds of thousands of pages of supporting documentation from one of its Websites, then used those tools to lure some 350 customers away from Oracle and over to SAP.
SAP took corporate responsibility for its TomorrowNow division's actions in a court document filed Oct. 28 and officially apologized on Nov. 16. As of Dec. 1, it hadn't been publicly determined whether SAP would appeal the decision.
Security people have certainly taken notice of this case, as have C-level executives, corporate attorneys, enterprise IT managers, investors, software developers, analysts, journalists and business people around the world.
Court judgments of 10 figures or more tend to attract that kind of attention.
One closely affected group of developers is the Oracle Applications Users Group (OAUG). David Ferguson, president of the 20-year-old, global-scale organization, was queried recently by eWEEK about the case and how it would affect the organization going forward.
Ferguson was asked about what lesson(s) the Oracle application developer community-and the IT business in general-might take from the case.
"It's very difficult to get beyond the obvious lesson promoted by the judgment in the case," Ferguson told eWEEK. "It's yet another in what is becoming a very long line of embarrassing moments for large publicly held global corporations. It steels the prevailing opinion that a profit motive always trumps ethical behavior.
"It's a very bad situation, and I feel terribly disappointed for the SAP shareholders."
Escalating concern about security
Ferguson said he believes the case illustrates in no uncertain terms the escalating concern about security shared by enterprises and individuals alike.
"In one important aspect, the verdict will surely underscore the growing concern over privacy protection and data security for our member community," Ferguson said. "Every one of our member companies would empathize with Oracle's right to protect intellectual property, and most are working hard to balance their own risk with the required investment to accomplish it."
Oracle-and it certainly is not alone in this-has been known to use a hard-nosed approach in its sales and service policies, is perceived to be overly expensive, is often accused of product lock-in, and at times has indicated a take-it-or-leave-it attitude.
Of course, all those attributes have played a role in Oracle's ascension to become the second-largest software maker in the world.
Ferguson was asked if he thought the SAP operation was indicative of retaliation of some sort, and whether this type of misdeed could happen again with other competitors.
"Every company would tell you they pay far too much in service and maintenance fees," Ferguson said. "That may be more a manifestation of the constant pressure for businesses to reduce costs than an overall indictment of Oracle's pricing policies.
"However, customers may feel that because of their significant investments in applications software and now hardware, enterprisewide systems are very difficult to write off and replace.
"The stronger the stance Oracle takes to prevent new entrants from providing alternative service options for these systems, the more trapped the customer may feel. Oracle's competitors in this space are very good at leveraging the pain point to their advantage."
Oracle may seek 'middle ground' in pricing
Ferguson said he thought Oracle will seek a "middle ground to protect its customers' investments" while also protecting its reoccurring revenue stream for services.
"One way they currently do this is through the OAUG's Customer Support Council, which exists to facilitate a dialogue between users and Oracle and thereby enable them to share ideas and work out a viable solution," Ferguson said.
Ferguson said that, despite talk within the industry about Oracle's sales approach, the company has shown that it can be "sensitive to pricing and the plight of their customer base."
"Feedback provided through the OAUG Customer Support Council [staffed by the user communities and Oracle] resulted in an extension of the standard licensing fee for application and database products beyond the 'five-year from release' limit," Ferguson said.
"The limit is set to encourage customers to upgrade and keep current. Their eventual consideration postponed the impact of a 10 percent increase of the existing licensing fees for every customer. A sacrifice in revenue by Oracle; news well-received in a very tough economic climate by the customer.
"Sometimes, we forget the good news in amongst the bad."

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor-in-Chief of eWEEK and responsible for all the publication's coverage. In his 13 years and more than 4,000 articles at eWEEK, he has distinguished himself in reporting...