Mud season #2

Posted: March 23, 2007 in CRM

I was working and minding my business the other day when a reporter called to ask some questions about Oracle’s law suit against SAP.   It was breaking news so I went to the Web and found it and made a few comments.  Later I read the complaint and drew some more nuanced conclusions.

First of all, while the names on the suit are of the parent organizations, this is really more about brands that are owned by the two.  Specifically, it’s about what’s alleged to have been done by TomorrowNow (TN) regarding Peoplesoft and JD Edwards.  The suit alleges that people from TN downloaded documents and programs related to support for Peoplesoft and JD Edwards products using the login credentials of legal users whose support agreements were about to expire or had already expired.

I don’t for a minute think that anyone from SAP corporate said or did anything to instigate this behavior; this appears to my eyes to be something done by the JV’s at TN.  TN, if you don’t know, is in the business of providing software support for products like Peoplesoft and JD Edwards at rates that are lower than what the authoring software companies charge.  It’s a business like many others where a competitor sees an opportunity to undercut someone and make a profit.

The problem comes from the fact that, if what is alleged really happens, the competitor—TN in this case—gets an unfair advantage by stealing support products to do its job.  It’s one thing to offer lower costs but quite another if you can do it without having to invest in support materials and that, I think is at the heart of the suit.

The other side of the suit is the fact that Oracle recently paid a lot of money for these companies and their assets.  One of the things that Oracle counted on when it made the purchases was the continuing revenue stream from legacy products to help pay for the acquisition.  Oracle had to figure on a reasonable amount of attrition when it tried to value the acquisitions and anything that causes the attrition to accelerate or for the models to get out of whack is a major concern.

When Oracle began noticing suspicious activity and higher than normal download activity, it had to set off all kinds of alarms that resulted in this law suit.  It also doesn’t hurt that Oracle had an opportunity to drag the name of its chief rival through the mud.

So, what did you think?

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