SAP admission of liability highlights Oracle third-party support issues

SAP AG's admission of some liability in a lawsuit brought against it by Oracle Corp. over third-party support services will likely speed resolution of the dispute between the two companies.

However, it really is a second similar lawsuit that Oracle filed earlier this year against another third-party service provider, which could prove more meaningful for Oracle customers, analysts said.

SAP agreed on Wednesday to assume liability for copyright theft claims made against it by Oracle .

The charges relate to a now defunct SAP subsidiary called TomorrowNow, which provided third-party support services to Oracle customers at about 50% of the cost that the vendor charged for it.

In its lawsuit, Oracle accused TomorrowNow of illegally downloading Oracle updates and maintenance tools in providing its third-party support.

In January, Oracle filed a somewhat similar lawsuit against Rimini Street , another third-party service provider that has managed to snag a growing number of Oracle and SAP customers largely by virtue of the fact that its prices are about half that of the enterprise vendors.

Oracle has accused Rimini Street of "massive theft" of Oracle software and support materials.

The lawsuits are viewed by many as somewhat cynical attempts by Oracle to protect its lucrative software maintenance revenues against outsiders.

Oracle, like other major vendors of enterprise software, including SAP, derives a major portion of its revenues from application support and maintenance services. Customers who don't sign up for the services are precluded from receiving any further software updates or patches from the company.

SAP's admission of liability will likely resolve its dispute with Oracle quicker, said Frank Scavo, managing partner of the IT consulting firm Strativa.

But the real test of Oracle's ability to prevent other companies from providing maintenance and support services for its software is the Rimini lawsuit, Scavo said.

"SAP had indicated from the very beginning that there was some validity to Oracle's claim," Scavo said. "So this is no great surprise."

The Rimini Street case is more interesting from a customer standpoint because Oracle could have a harder time supporting its claims of copyright theft, he said. "My understanding, having spoken to Rimini Street, is that they have taken extraordinary measures to protect both Oracle and SAP intellectual property."

"They have indicated, by countersuing Oracle , that they plan to fight Oracle vigorously and even are welcoming the opportunity to do so," he said.

The issue is an important one for customers who are tied to expensive maintenance contracts with their vendors simply because they have no place else to go, added Paul Hamerman, an analyst with Forrester Research in Cambridge, Mass.

Over the past few years, only a handful of companies have even attempted to deliver third-party services and often the ones that do are afraid to openly disclose that fact for fear of legal issues, he said.

Many of the systems-integration companies that are in a position to deliver such services, often also don't want to do it for fear of losing out on their business partnership status with the software vendors, Hamerman said.

"The third-party software maintenance market is a viable market," and one that is going to remain largely unaffected by the outcome of the SAP/Oracle dispute, he said.

"Customers are feeling a lot of pain over the ongoing costs of ownership of enterprise applications," Hamerman said. There is a significant uptick in interest in third-party services especially because many enterprise applications such as human resources and payroll are fairly stable and are rarely in need of frequent vendor updates or support, he said.