SAP's subsidiary stays mum on Oracle suit

SAP subsidiary TomorrowNow has finally officially responded to Oracle's lawsuit against the company and its parent SAP filed over two week ago

SAP's TomorrowNow subsidiary has finally publicly commented on the legal action it's facing from SAP's bitter applications rival Oracle.

More than two weeks ago, on March 22, Oracle filed a surprise lawsuit in U.S. District Court in San Francisco against SAP, its SAP America division, its TomorrowNow subsidiary and 50 unnamed individuals Oracle claims were SAP employees. Oracle alleges the defendants violated U.S. fraud legislation and engaged in unfair competition and civil conspiracy.

"We are still reviewing the matter and until we have a chance to more fully understand the allegations, it would not be prudent to comment on the pending litigation other than to make it clear to our customers, prospects, investors, employees, and partners that SAP will aggressively defend against the claims made by Oracle in the lawsuit," TomorrowNow said in a statement issued Monday. "SAP will remain focused on delivering products and services --including those from TomorrowNow -- that ensure success for our clients."

TomorrowNow parent company SAP issued a statement very much along the same lines the day after Oracle filed the lawsuit. Why it has taken TomorrowNow so long to officially respond is unclear. Previously, the subsidiary directed all requests for comment to its SAP parent.

SAP acquired TomorrowNow in January 2005 and the subsidiary provides support and maintenance services primarily for PeopleSoft, JD Edwards and Siebel customers. Oracle owns all three application families after having previously purchased PeopleSoft and Siebel.

Oracle's complaint alleges that one or more staff at TomorrowNow pretended to be Oracle customers and illegally hacked into its secure support Web site for users of PeopleSoft and JD Edwards applications. Oracle further alleges that SAP then copied content from the Oracle site and used it to offer Oracle customers cut-rate support services in the hopes of eventually migrating them to SAP's rival applications.

Monday's TomorrowNow statement also referred to the company's intention to continue delivering support services to its customers, adding, "We are confident in the strength and value of our support services and in all aspects of our business model. We will continue to support our clients, as we have always done, with quality and professionalism."

Debate about Oracle's lawsuit, which came out of the blue, a few days after the company announced strong third-quarter financial results, has been intense.

Some observers see the suit as highlighting issues around the viability of a third-party maintenance market. Oracle itself is a player in two areas of that market -- offering support for SAP's older R/3 applications through a partnership with Systime Computers since May and its Unbreakable Linux initiative unveiled in October to support users of Red Hat's Inc. Enterprise Linux distribution. Other industry watchers believe either TomorrowNow did nothing wrong or that the alleged actions were those of a rogue employee.

Last week, SAP made its 2006 annual report publicly available and the statistics on TomorrowNow made for interesting reading, indicating the subsidiary had been something of a poor performer among SAP's businesses. All of the subsidiary's operations in Australia, the Netherlands, Singapore, the U.K. and the U.S. reported net losses for fiscal 2006. TomorrowNow's U.S. business was the only one of the five to have positive equity. TomorrowNow and SAP didn't comment on the reasons for the net losses and negative equity.

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