It is still unclear exactly what Oracle's lawsuit will mean for SAP and TomorrowNow, but the bigger issue may be the attention it brings to a growing trend -- third-party software support.
No consensus has yet emerged on what will come of Oracle's lawsuit against SAP. Some feel that SAP may need to cut ties with TomorrowNow, its unit that provides Oracle maintenance and support. Others feel that SAP will simply settle or pay a small fine.
Other experts see even less coming out of the lawsuit.
"This is totally a guess, but I think on Christmas Eve or some other great news blackout period, SAP will do the apology/charity thing to make it go away," said Dennis Byron, analyst for Dennis, Mass.-based IT Investment Research. "Even if they don't feel they did anything wrong."
One reason the suit is unlikely to go to trial is that it could expose some behind-the-scenes information about a business that is very profitable for Oracle, SAP and other software vendors -- maintenance and support.
"It would be an upset if the suit ever goes to trial," said Josh Greenbaum, principal consultant for Berkeley, Calif.-based Enterprise Applications Consulting. "It would be potentially devastating to Oracle for people to find out why this maintenance revenue is so profitable."
According to Oracle's Q3 earnings report, software license updates and support brought in $2.1 billion and accounted for only $210 million in operating expenses.
Death knell or boon?
So, the bottom line appears to be that the lawsuit is probably not a death knell for SAP, TomorrowNow or third-party support. In fact, many believe that over the long term, this added attention could actually be a boon to the third-party support market.
"This lawsuit may well serve to popularize third-party support at 50% of normal rates," said Michael Doane, founder and chief intelligence officer of Performance Monitor in Peachtree City, Georgia. "I wouldn't be surprised if a large segment of the Oracle and SAP installed base didn't know of the third-party option."
SAP acquired PeopleSoft and JD Edwards support-provider TomorrowNow in early 2005 in the hope of wooing Oracle customers off its maintenance and support program.
Also in early 2005, SAP extended its "Safe Passage" program and Oracle debuted Oracle Fusion for SAP -- or OFF SAP -- to lure away each others' customers. Each company has claimed successes in the battle to switch customers, with no clear leader emerging.
Purchasing support directly from the software vendor makes sense for new customers and those wanting to stay up to date with the latest software releases.
"The decision to go with a third party comes down to a question of core functionality -- is the functionality that we need critical to be integrated/embedded?" explained Mitch Myers, vice president of operations for Tulsa, Okla.-based manufacturer FW Murphy, an Oracle/JD Edwards customer. "If so, we push Oracle product strategy; if not, then we will consider a third party."
The large contingent of companies that use older, more stable technology are a fit for significantly less expensive third-party support.
"There is tremendous interest in third-party support, regardless of the vendor, as enterprises continue to seek value in their maintenance fees," said Ray Wang, principal analyst for Cambridge, Mass.-based Forrester Research Inc. "For those who may have remained with a vendor for seven to 10 years, they've paid the equivalent of almost two times their original license costs in maintenance."
But many of those companies don't feel they've gotten their money's worth in terms of support, Wang added.
Despite third-party support's cost benefits, providers may struggle in the short term because of the lawsuit, according to experts.
"Regardless of the merits of the suit, TomorrowNow had the most ability to fight Oracle since it is owned by SAP. With other independent providers, that extra security isn't there, so there's a certain fear," Greenbaum said. "Customers want to make sure that whoever they sign on with will be around in five to 10 years. So there will be a stall in the market while the dust settles."
Because of the lawsuit, companies considering the third-party support option should make sure that any contract they sign states that they are not responsible for misuse of intellectual property by the third-party vendor, according to a research note from Stamford, Conn.-based Gartner Inc.
Those who are already working with third-party vendors should, likewise, monitor customer service account usage to be sure that employees are using only intellectual property obtained prior to cancelling service from the application vendor, Gartner said.
Even accounting for any short-term hiccups, analysts agree that third-party support is an option whose time is coming.
"The cat is out of the bag," Greenbaum said. "There's a demand, and the free market will supply it. Short of some truly anti-competitive efforts, there will be a healthy third-party support market in the future. How near, remains to be seen."