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Oracle raises stakes

The fierce rivalry between Oracle and its European adversary SAP took a somewhat unexpected twist last week when Oracle filed a lawsuit against the German firm alleging it stole proprietary software. IT Weekly examines the situation and its implications.

When reporting his company's most recent set of financial results, Oracle CEO Larry Ellison was extremely upbeat about the competition with rival SAP. Perhaps unsurprisingly: while the German firm had said in January that it missed its sales targets, Oracle had exceeded analysts' expectations.

"We think we have a good chance to catch and pass SAP in the overall applications business," Ellison told investors in a conference call, pointing to figures showing new licence sales in that business were growing at a faster rate than SAP's.

However - as Ellison is all too aware - new licence sales are not the entire story in the applications market. While financial analysts track such sales keenly, as they are a key guide to future revenues from technical support deals, software firms rely on the latter for a large chunk of their business.

Last week, Oracle announced that it thought SAP was using unfair methods to boost its technical support business by hacking into Oracle's customer database and downloading copies of its proprietary software code.

The software firm has filed a lawsuit against SAP and its wholly-owned subsidiary TomorrowNow, which sells technical support for products sold by PeopleSoft, JD Edwards and Siebel Systems - all acquired by Oracle since SAP bought TomorrowNow in 2005.

While Oracle's typical support costs for annual maintenance are around 22% of the licence price, TomorrowNow charges around half of that - helping it to win around 500 customers from Oracle in the past two years.

The lawsuit claims that SAP and TomorrowNow have been using more than favourable pricing tactics to win those customers; it is accusing SAP of "corporate theft on a grand scale", having "engaged in systematic, illegal access to - and taking from - Oracle's computerised customer support systems. Through this scheme, SAP has stolen thousands of proprietary, copyrighted software products and other confidential materials that Oracle developed to service its own support customers," the complaint alleges.

According to Oracle's lawsuit, last November the firm detected unusually heavy volumes of traffic on a password-protected site, Customer Connection, which allows licensed PeopleSoft and JD Edwards customers access to proprietary product and support information.

While providing such information is a crucial part of Oracle's support package, the firm said that the access and download activity it was witnessing was very different from what it would normally expect. For instance, one customer who normally downloaded around 20 items a month suddenly downloaded over 1,800 items a day for four days straight, Oracle said.

Oracle claims that this "systematic theft" was actually caused by SAP employees using the log-in credentials of Oracle customers with expired or soon-to-expire support credentials, with the "purported" customers taking software and support materials they were not entitled to.

"All of these customers whose IDs SAP appropriated had one critical fact in common: they were, or were just about to become, new customers of SAP TN - SAP AG's and SAP America's software support subsidiary whose sole purpose is to compete with Oracle," the report stated.

Unsurprisingly, SAP has hit back at the claims, claiming it will "aggressively defend itself" against them.

"SAP 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 said in a statement this week. "SAP will remain focused on delivering products and services - including those from TomorrowNow - that ensure success for our customers."

Analysts have suggested that criminal charges could follow against SAP if Oracle could provide evidence that its allegations are true. However, it has also been questioned whether SAP would allow itself to be so easily implicated - allowing its staff to use its own servers and networks to engage in corporate espionage.

A broader issue is the impact this could have on the entire third-party support market - a lucrative business that Oracle itself is involved in.

Analyst firm Gartner said in an online advisory this week that customers who decide to engage a third-party for technical support would need to protect themselves contractually.

While customers might want to check their own legal status, with the stakes running into the billions of dollars, it seems highly unlikely that either Oracle or SAP will let this one drop.

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