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An ERP Vendor Soap Opera: A Close Look at SAP's Purchase (and Attempt to Sell Off) TomorrowNow

When SAP acquired cut-rate ERP service provider TomorrowNow, observers scratched their heads. How would the two work together? Then Oracle sued, alleging stolen information. SAP isn't waiting for its court date. It's ready to entertain buyers for TomorrowNow.

By Thomas Wailgum

December 05, 2007 — CIO — SAP has cleaned house in the managerial ranks at its troubled TomorrowNow subsidiary and, in the process, has raised many questions for customers about its future—and theirs. But so far, the German software giant isn’t offering any answers, just a big fat “For Sale” sign on TomorrowNow’s front lawn.

On the Monday evening of a Thanksgiving holiday week, typically a slow period for business news, SAP announced that the CEO and senior executives at its TomorrowNow subsidiary had resigned. “TomorrowNow CEO Andrew Nelson and several members of his senior management team are leaving the company,” said the press release, which was distributed on Nov. 19. Mark White, who was appointed TomorrowNow's executive chairman in July, appeared to be the sole senior executive survivor, as SAP said he would remain in that post.

The announcement was not a shock to many in the industry due to several factors. First, industry insiders and analysts say there has always been tension in the SAP and TomorrowNow marriage because of their competing business models.

While enterprise software vendors like SAP and Oracle (and its subsidiaries, J.D. Edwards, PeopleSoft and Siebel) historically have charged annual software maintenance fees that equal 20 to 25 percent of the software’s price, startups such as TomorrowNow and Rimini Street have provided IT executives the same important maintenance services for typically half the price.

One Big Headache for a Little Acquisition

TomorrowNow, with its customer base of about 300 companies, must have seemed like a small pickup for SAP, which has more than 43,000 customers in 120 countries and a market capitalization of more than $60 billion.

And if the inherent competition between SAP’s licenses and TomorrowNow’s cut-rate pricing didn’t pose a problem on the surface, something else did: In March, SAP’s archrival, Oracle, filed a federal lawsuit in San Francisco alleging that TomorrowNow employees had illegally accessed Oracle’s proprietary software products and materials, and had downloaded those materials onto TomorrowNow’s computers.

In court papers, Oracle alleged that TomorrowNow had “engaged in systematic, illegal access to—and taking from—Oracle’s computerized customer support systems.” And as a result, “SAP has compiled an illegal library of Oracle’s copyrighted software code and other materials,” the suit stated.

It took almost four months for SAP to respond in public to Oracle’s suit. Then, in July came this response:

SAP said in court papers that TomorrowNow was authorized to download materials from Oracle’s website on behalf of TomorrowNow customers. At the same time, SAP acknowledged that some inappropriate downloads of fixes and support documents occurred at TomorrowNow.

Importantly, SAP affirmed that what was downloaded at TomorrowNow stayed in that subsidiary’s separate systems. SAP did not have access to Oracle intellectual property via TomorrowNow.

 

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