Will Oracle's Suit Hurt SAP's Image?

Industry insiders weigh in on the lawsuit, its merit, and its possible effects on the software maker's image and reputation

By Andy Reinhardt and Kate Norton

German corporate software giant SAP has always portrayed itself as more credible and trustworthy than its archrival, Oracle. That's why the charges leveled in a lawsuit filed by Oracle on Mar. 22 against SAP are especially shocking.

In the 43-page suit, Oracle (ORCL) alleges that SAP (SAP) committed "corporate theft on a grand scale" by downloading thousands of copyrighted software patches and other confidential support materials from Oracle servers (see BusinessWeek.com, 3/23/07, "Oracle Files Suit Against SAP").

According to the filing, employees of SAP's TomorrowNow unit, posing as Oracle customers, logged into the Oracle support network and copied intellectual property so that SAP could compete more aggressively against Oracle. TomorrowNow provides after-sales support for older software packages from providers PeopleSoft, J.D. Edwards, and Siebel, all of which have been acquired by Oracle and whose applications are being phased out.

SAP won't discuss the case, but vows to fight. In a published statement, the company said, "[We] will not comment 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. SAP will remain focused on delivering products and services—including those from TomorrowNow—that ensure success for our customers."

The question now is whether, even if the charges are disproved and Oracle loses in court, SAP's image and reputation already have been damaged. One London financial analyst who requested anonymity said he sees the case as a "spot of tarnish" on the German giant. But, he adds, "This won't change how customers make their buying decisions. At the end of the day, they buy the product for the product."

Still, SAP faces a challenge in communicating with its stakeholders—customers, employees, shareholders, and the community of analysts and market researchers who follow the company. BusinessWeek.com investigated what this suit could mean for SAP's reputation with a variety of experts. Here are excerpted comments from three we spoke to:

David Mitchell

Software Practice Leader, Ovum consultancy, London

What's your analysis of this lawsuit?

My initial take is that SAP has always had very strong integrity. I don't see the case as anything rotten in the DNA—more as an individual allegedly acting inappropriately. Even though substantial evidence has been put on the table, it's an innocent-until-proven-guilty situation. If it happened, it was an individual or small group of individuals who did it.

Heads could roll if there proves to be a traceback. If anyone is proved to have sanctioned the measures, either implicitly or explicitly, I'd expect SAP to hold them to account.

Could this affect customer purchases?

The fundamental question is whether customers take ethical questions into account when making purchasing decisions and the answer is "yes." This will undoubtedly cause uncertainty, but it is entirely down to how SAP plays the game from now on. If they handle it appropriately, we can all get back to business as normal.

I've already had inquiries from three customers of mine today, who are also SAP customers, asking if the case will have implications for them if SAP delivered data collected through inappropriate means. My initial response is that it doesn't have risks or implications for the end customer. I would encourage Oracle to issue a statement that it's not going to pursue end users, because that would ease uncertainty.

Do you think SAP will sell its TomorrowNow subsidiary?

That could be one of the responses, but strategically TN is a very useful asset and this case doesn't change that. SAP bought it because support and maintenance is a good business on its own. It also gives opportunities to cross-sell and upsell to existing Oracle accounts and possibly replace them eventually. If the issue is as localized as I hope and expect, why would they dispose of it?