News Analysis: SAP's TomorrowNow Debacle Ends With Jury Award Of $1.3B To Oracle

The recently announced jury award of $1.3B to Oracle marks the end of a tumultuous public trial on intellectual property (IP) theft.  Fellow Constellation Research Board of Adviser, Dennis Howlett provided commentary on the award stating,

"The jury were given the choice of making an award based upon a fair market value license or lost profits. If the jury had looked at lost profits then it is difficult to conceive how they could have awarded anything approaching this amount. Even looking at fair market value, one wonders how they managed to compute such a figure given the number of customers TomorrowNow actually secured and the value of those contracts"

Should the record breaking award be upheld, the decision will serve as a lesson carefully studied by every high tech company on how and how not to handle IP theft cases.  Oracle has made a significant win and SAP acknowledged guilt throughout the case.
The Bottom Line For Customers And Buyers Of Enterprise Software
Though many pundits have commented on the impact to SAP and the overall high tech market, a few key points should be clarified for customers:

  • Penalty award significant in size but not detrimental to SAP. The award will not materially impact SAP's ability to conduct business or invest in future products.  Insurance, rainy day funds, and other sources of revenue should cover this amount.  Given SAP's 30%+ profit margins and its ability to generate revenues of $12 to $15B a year, this is a small price to pay for a huge mistake in judgment.  Customers should not be concerned.  SAP can also appeal.
  • Verdict does not impact the third party maintenance market. This trial focused on IP theft.  This trial does not address the issue of whether or not third party maintenance is or is not a right for customers.  This trial does not provide the ground rules on how third party maintenance could be delivered by a solution provider.   The trial does put some frameworks on ownership of support and maintenance IP.  A separate lawsuit by Oracle with RiminiStreet will address this issue of third party maintenance rights.
  • HP escapes with minimal damage. With a settlement out of the way, HP and its new CEO, Léo Apotheker,  can carry on with future plans without the albatross of a lawsuit.  In many ways, Leo avoided the limelight with a little luck and deftness.

Your POV.
Will the lawsuit impact your purchasing plans w/ SAP?  Do you care that Oracle won?  Do you feel the jury made the right decision?  Please post or send on to rwang0 at gmail dot com or r at softwareinsider dot org and we’ll keep your anonymity.
Related Resources And Links
20101123 ZDNet: Irregular Enterprise - Dennis Howlett "Jury Slams SAP With $1.3B In TomorrowNow Lawsuit"
20101123 Wall Street Journal - Cari Tuna "Jury Rules SAP Owes Oracle $1.3B"
20101123 SAP Global Communications - Bill Wohl " SAP Statement on Jury Verdict in Oracle v. SAP"
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