Oracle Corp. (NASDAQ:ORCL) has filed suit against giant German software company and its number one rival SAP AG (NYSE:SAP). This is going to be interesting as the details unfold. The suit was filed in U.S. District court in San Francisco, Oracle's backyard. Oracle claims that SAP used mutual customers' password codes to enter the Oracle's main web support site to steal and download software code.
This is almost funny and really does not make much sense:
The mega applications company SAP has been the undisputed worldwide leader in business applications, from HR applications to financial applications to business processes applications. SAP is renowned for its superior research and development work and innovation of its product set from the inside. Oracle, on the other hand, is the undisputed leader in database software, world-wide, and very mediocre when it comes to the applications business.
Oracle's past ten years of research and development efforts have been so dismal that the company had to resort to many acquisitions to fill the gap. Oracle has spent $20 billion on 30 different acquisitions the past three years. It is certainly making in-roads compared to SAP in the applications business, but it is still in a distant second place.
Oracle has never been known for its customer service. SAP is renowned for its customer service. This is what makes this suit so interesting. This may be Oracle's attempt to "freeze" the market place for awhile as was a common practice back in the 1990s when competing software firms would sue each other claiming stolen software code.
The whole new legal arena of "intellectual property" is interesting. When one engineer leaves a company to join a rival, does the software configuration code in his head belong to him or to his previous employer? It's a matter of interpretation and what the judge is listening.
The medical device industry is also renown for its law suits and counter-suits: Medtronic Inc. (NYSE:MDT) Vs. St.Jude Medical Inc. (NYSE:STJ), St. Jude vs. Boston Scientific Corp.'s (NYSE:BSX) Guidant etc. It typically froze the market as customers do not want to align themselves with one side or the other or take sides during a dispute.
Oracle has thrown down the gauntlet. The ensuing details will be fascinating to watch. Stay tuned.
Georges Yared is the author of "Stop Losing Money Today" and "Baby Boomer Investing" Please visit www.georgesyared.com
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Reader Comments (Page 1 of 1)
3-25-2007 @ 2:01PM
Jeff said...
George - you are missing the point. Oracle is claiming that SAP/TomorrowNow (TomorrowNow is a company SAP purchased) illegally obtained Oracle copyrighted software and support materials for the
purpose of providing TomorrowNow with the resources necessary for TomorrowNow to provide support services for Oracle products at a discounted rate. The article says that 'this is almost funny and
doesn't make much sense'. It makes perfect sense - it provides TomorrowNow with up-to-date resources (at no cost to TomorrowNow) that helps TomorrowNow to provide discounted support services for Oracle products (PeopleSoft, JDEdwards, Siebel). Being able to provide those support services helps SAP/TomorrowNow to be in a position to be able to assist those clients in migrating to SAP. The answer to the question of whether SAP would have a motive to do this is obvious. SAP and Oracle are 1 and 2 in the business applications market. They have both instituted campaigns to help customers
migrate away from the other (Oracle with their 'Off SAP' campaign and SAP with their 'Safe Passage' campaign). And, most importantly, they don't like each other. The motive to take market share from the other is there. The relevant questions are not who is the leader in business applications, better at R&D, or better at customer service. The relevant question is whether or not the market leader SAP (or
specific SAP employees) unethically utilized unauthorized access to copyrighted Oracle materials to help further their goals. Even more intriguing are the follow-up questions concerning the level of
corporate accountability and oversight responsibility if this did happen unbeknownst to the upper levels at SAP.