There’s a new development afoot in the SAP-Oracle dustup over TomorrowNow–the filing of a joint Case Management Conference (CMC) Statement that stakes out SAP and Oracle’s positions in advance of the Case Management Conference that will take place on April 24, 2008, with Judge Phyllis J. Hamilton presiding.

The CMC Statement is notable for setting out Oracle’s case against Tomorrow now in a fair amount of detail. Here are excerpts from the most damning accusations:

“Defendants [SAP] have a dedicated bank of 20 “download servers” to accomplish the unauthorized taking and infringing conduct…”

“Defendants compiled a master download library of Oracle-based Software and Support Materials that exceeds five terabytes in size – so large that Defendants could not produce it for over six months…”

“Defendants have approximately 3,000 copies of Oracle software applications on their systems, each one of which may additionally have included within it illegally downloaded Software and Support Materials…”

“Virtually every one of the almost 200 TN employees had some involvement in TN’s illegal activity. Documents produced by Defendants suggest that SAP AG and SAP America employees and managers had involvement in or knowledge of TN’s infringing conduct.”

SAP won’t admit that any overt illegality took place, preferring to put the emphasis on what it considers Oracle’s misguided use of the legal process: “Oracle insists on overly broad, unnecessary discovery into what TN accessed as part of providing third party support; it should be compelled to explain how TN’s support of its former customers harmed Oracle, and to permit immediate discovery into that elusive claim.”

Whatever the case, the TomorrowNow acquisition continues to be a headache for SAP, which is unable to find a buyer for the company and has spent a lot of money on the Oracle lawsuit.

For more context, check out today’s SearchSAP story on the CMC.

Demir Barlas, Site Editor

SAP’s bid to keep what it called “highly confidential” information pertaining to the Oracle lawsuit over TomorrowNow has been blocked in a California courthouse. Of course, there’s no telling just what that information is, but it might reveal strategic insights into TomorrowNow’s operations and/or intellectual property. Coming just after the news that Rimini Street won’t buy TomorrowNow, this latest twist is another headache for SAP, which may well be wishing it had never bought TomorrowNow in the first place.

It’s easy to forget that the idea of third-party ERP service was very hot in 2005. However, the fate of TomorrowNow indicates the potential for litigation that can arise when one company services another company’s product. Support and service offer big profit margins, and it’s no secret that enterprise applications companies will work hard to keep these functions close to the vest. In any case, given that SAP and Oracle have tens of thousands of customers, but only a few hundred opt for third-party support, it doesn’t seem to be a very viable domain in the first place.

Demir Barlas, Site Editor

Waste Management is suing SAP for over $100 million in damages alleged to arise from SAP’s “fraud” in misrepresenting its waste management software to the company. Those interested in learning more about the lawsuit can download the entire brief here: Waste Management versus SAP. If you lack the time to peruse this 52-page document, here are the key allegations:

“…SAP fraudulently induced Waste Management to license an ‘United States applicable’ Waste and Recycling Software solution”

“This software was represented to be a ‘waste industry standard solution with no customization required.’”

“SAP further represented that the Software was an ‘integrated end-to-end solution.’”

“Unknown to Waste Management, this ‘United States’ version of the Waste and Recycling Software was undeveloped, untested, and defective.”

“SAP knew that it had competition from other companies in landing Waste Management as a client, and it was keenly aware that Waste Management’s preferred solution was a proven, ‘out-o-f-the-box’ product that could be rapidly installed.”

“…the software modules used by SAP in its ‘United States’ version of the Waste and Recycling software had never been used together before and had never been tested in an actual productive business environment.”

“[SAP’s] pre-contract demonstrations were in fact nothing more than fake, mock-up simulations that did not use the software ultimately licensed to Waste Management.”

“SAP repeatedly stated that the capabilities and functionality of the software were exactly as appeared in the demonstration.”

“…the SAP implementation team had never before worked with the software SAP licensed to Waste Management.”

“…the software…was nothing more than beta software–i.e., software still in development and utterly incapable of running the operations of an American waste and recycling company.”

“The installed software failed to contain basic functionality that had been represented to Waste Management and was unable to run Waste Management’s most basic revenue management operation. Instead of making Waste Management aware of these known software problems, SAP attempted to re-program the core software code during the implementation process.”

“SAP purportedly utilized its knowledge of Waste Management’s business, gained in part through its employment of a former Waste Management controller [Dean Elger], to develop the software.”

“Based on SAP’s specific representations concerning the purported capabilities of its Software, the Business Case generated net annual benefits to Waste Management of between $106 million and $220 million per year.”

“[SAP represented] that it would implement the Software at Waste Management on a company-wide basis within 18 months, or by December 31, 2007.”

“Waste Management justifiably relied on SAP’s misrepresentations in agreeing to change orders and paying SAP additional fees to have SAP attempt to provide the very functionality that SAP had represented, during its sales campaign, was contained in its purportedly ‘out-of-the-box’ solution. Through its deceptive change order scheme, SAP improperly recovered its internal costs incurred in software development work that was supposed to have been its responsibility.”

“…the downporting and core code modifications have radically altered the Waste and Recycling Software licensed by Waste Management, to the point where that Software is incompatible for routine future upgrades.”

Details about this lawsuit were sketchy at first, but it’s clear from this document that Waste Management has very specific allegations to make. Furthermore, Waste Management keeps making the tantalizing claim that SAP’s own “internal documents” admit to these allegations. Now the justice system can sort it out.

Demir Barlas, Site Editor

Waste Management, which spent $100 million on SAP software and characterized the project as a “complete failure” in a lawsuit filed March 20, is out for blood. The company seeks damages, including punitive damages, from SAP, whose Waste and Recycling Software software was excoriated by Waste Management in the text of the lawsuit. In part, the lawsuit alleges that, “Unknown to Waste Management, this ‘United States’ version of the Waste and Recycling Software was undeveloped, untested and defective.”

Waste Management came to SAP via the “Safe Passage” program that was supposed to entice PeopleSoft users to SAP during Oracle’s drawn-out bid for PeopleSoft. At the time, Waste Management was a company in crisis. SEC Administrative Proceeding No. 3-10513 had found the following: “As early as 1988, members of Andersen’s audit engagement tram recognized that Waste Management employed ‘aggressive’ accounting practices to enhance its earnings.” In the brouhaha that followed, Waste Management’s board fired the company’s management.

Waste Management’s executive suite attained their current positions in 2004. As such, it seems that the company had a lot on its plate at once: overcoming an crisis, appointing new leadership, and launching a major ERP project.

This is not to say that Waste Management’s lawsuit is mistaken. No one can know for sure until after the wheels of justice turn. However, as it is, something seems lost in the telling. How could a company spend $100 million on software that is “undeveloped, untested and defective”? More pertinently, how could these facts about the software be “unknown” to management? ERP implementations can take years, and are accompanied by rigorous testing and planning. If SAP’s software is indeed a “complete failure,” Waste Management’s executives might well have been asleep at the wheel; no one should pay $100 million and wait two years to find out they’ve bought a defective product. If SAP’s software turns out not to have been to blame, Waste Management will still have done damage to SAP’s share price and reputation — for how long, no one can tell.

Demir Barlas, Site Editor