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TomorrowNow executives resign, SAP ponders selling division

TomorrowNow's CEO resigned today and SAP says it's considering selling the third-party support provider.

TomorrowNow's CEO will resign along with other senior executives and SAP revealed today that it is now considering selling the star-crossed unit.

TomorrowNow's current CEO, Andrew Nelson, one of the founders of the Bryan, Texas-based third-party support provider, and several members of TomorrowNow's senior management team are resigning, effective immediately, an SAP press release read. TomorrowNow's management team also includes Nelson's wife and other family members, according to Ray Wang, a principal analyst for Cambridge, Mass.-based Forrester Research Inc.

"SAP wants to put a fresh face on TomorrowNow," Wang said.

Mark White, who was appointed by SAP as executive chairman of TomorrowNow in July 2007, will continue in that role, according to the SAP statement.

"Our primary focus is TomorrowNow's existing customers, who will be supported through this management transition," White said in a statement. "SAP is prepared to manage through these changes to ensure that TomorrowNow's obligations to its current customers are met."

SAP acquired TomorrowNow in early 2005. At the time, some questioned whether the company could still provide independent maintenance and support while owned by SAP.

Then, in March of this year, Oracle filed a lawsuit against SAP accusing the TomorrowNow division of "inappropriate downloads" of Oracle support materials, among other things.

In response, SAP attempted to distance itself from Oracle's allegations, saying it did not have access to TomorrowNow's alleged stolen property.

"We can say that a number of key allegations made by Oracle and examined by [SAP] appear to be unfounded," SAP CEO Henning Kagermann said in a conference call at the time. "In particular, we believe that SAP did not have access to Oracle materials downloaded by TomorrowNow. Oracle support materials and bug fixes remain in TomorrowNow's separate systems and did not pass across our firewall to SAP."

Since Oracle's allegations came to light, industry observers have speculated that SAP would settle the lawsuit.

"There's going to be a settlement," Hillard Sterling, an IT litigator with Freeborn & Peters LLP, a Chicago-based law firm, said in an interview after SAP responded to the charges. "That's not an 'if' question, it's a 'when' question."

Third-party support still going strong

News of the shake-up at TomorrowNow shouldn't dampen the third-party support market as a whole, according to analysts.

"Support is still one of the highest-margin areas for vendors," Wang said. "Vendors will have to continue to provide more value, or third-party support will continue to be an attractive option to customers."

Paul Hamerman, business process and applications vice president for Forrester, agreed that customer demand for third-party support is real but said SAP's place in that market is unclear.

"I believe that the third-party support market is a viable market opportunity, based on customer demand," Hamerman said. "It is questionable whether there is a strategic fit for SAP to remain in this business, notwithstanding the legal situation."

If SAP sells TomorrowNow, one possible landing place of interest, according to Wang, is its Las Vegas-based rival, Rimini St., which focuses on Siebel, PeopleSoft and JD Edwards support and was founded by Seth Ravin, one of the original founders of TomorrowNow. According to Wang, Rimini St. currently counts about 50 customers to approximately 300 for TomorrowNow.

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