Oracle sues SAP in maintenance contract battle

Software maintenance--who provides it and at what price--is at the heart of the corporate theft lawsuit Oracle filed against arch-rival SAP.

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Software maintenance--who provides it and at what price--is at the heart of the corporate theft lawsuit Oracle filed against arch-rival SAP.

Oracle charges SAP, its SAP America division and its TomorrowNow subsidiary with stealing thousands of software products and confidential materials from Oracle. In the suit, filed in the California courts, Oracle said the case is about "corporate theft on a grand scale."

But there's probably more to it than that. "This is totally about third-party maintenance," said Ray Wang, principal analyst at Forrester Research. "If Oracle wins, this decimates the third-party maintenance market."

SAP's TomorrowNow subsidiary provides support services to users of Oracle software. TomorrowNow requires access to certain Oracle technology in order to serve its customers. Oracle appears to be taking issue with the way that TomorrowNow acquires that information, Wang said.

There's good reason that the companies are fighting over software maintenance. The market for software maintenance is growing about 9 percent each year, compared with software licensing revenue growing closer to 7 percent, Wang said.

On a $1m (£500,000) software licensing contract, a company might spend more than $200,000 (£100,000) a year to the software provider on maintenance, he said. Third-party companies such as TomorrowNow, however, tend to charge 10 percent to 15 percent of the cost of the software, rather than 20 percent to 25 percent, for maintenance, Wang said.

Both SAP and Oracle are involved in delivering third-party maintenance services. Through a partnership with Systime, a subsidiary of CMS Computers, Oracle offers some maintenance for users of certain SAP products.

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