SAP could sell off its embattled division amid Oracle suit

The world's second largest software publisher may be forced to sell off a profitable and lucrative division, in the wake of an admission last July that its employees downloaded material from rival Oracle without authorization.

Last July, the German software giant SAP AG made an extraordinary admission: It confirmed claims brought forth by Oracle in March that its customer support division TomorrowNow (TN) -- which provides leased support for Oracle products as well as SAP's own -- improperly and perhaps illegally downloaded materials from Oracle's Web site by masquerading as one of its customers.

Yesterday, SAP stated several of TN's top executives have stepped down, including CEO Andrew Nelson and several members of his management team; and that a possible sale is one of the options being considered.

With the heat turned up full on Europe's largest software publisher, according to the Truffle 100 rankings and the world's #2 software publisher in market capital, it now finds itself facing the prospects of either a nasty reorganization, or becoming reorganized in a less desirable manner.

As SAP reshuffles TN's staff amid a lawsuit from Oracle alleging intellectual property theft, SAP has determined that selling off the beleaguered business unit is its best possible option, a spokesperson for the enterprise resource planning software giant said today.

Acquired by SAP in 2005, TN provides support services for business software from PeopleSoft, JD Edwards, and Siebel -- three entities that have been bought by Oracle over the past few years -- as well as for Baan. At that time, Oracle was talking up intentions to combine Oracle's and PeopleSoft's software through a project known as Fusion. For the past couple of years, SAP's TN unit has been giving customers of Oracle's acquired companies another option for software support aside from Oracle.

But this afternoon, Andy Kendzie, a spokesperson for SAP, elaborated a bit on the press release issued Monday, telling BetaNews that selling TN is SAP's "first option" -- as opposed to just one of several -- and that it's the course of action SAP would prefer above any others.

SAP officials had been largely quiet about the announcement until today.

Oracle slapped SAP with a lawsuit alleging that TomorrowNow performed "corporate theft on a grand scale" in downloading software from Oracle on behalf of TN's customers.

According to another statement from SAP, currently posted on the German-based vendor's Web site, the Northern District Court in San Francisco, CA conducted its first case management conference in the SAP v. Oracle case on Sept. 25 of this year.

Beyond discussing using mediation as an alternative dispute resolution process during the case, the Court set February 12, 2008 as the data for a further case management conference and February 9, 2009 as a trial date.

Before that, in court papers filed in July, SAP denied any "corporate theft" in connection with software downloads from Oracle, also asserting that it was TN, rather than SAP America or European-based SAP AG, which conducted the downloads, and that the downloads were done subject to policies "intended to assure that TN downloaded only those materials that TN's customers had access rights to during the time those rights were effective."

SAP also told the court, however, that TN "admits that certain downloads took place that, in violation of TN policies, may have errneously exceeded the customers' right of access."

Kendzie said today that SAP has now begun a process -- sketched out in yesterday's press release with very few details -- of communicating with TN customers around new programs to secure continued delivery of support services and keep key managers and support people aboard.

"If customers haven't heard from us by now, they'll be hearing from us quite shortly," according to the spokesperson. "That's our highest priority."

The unspecified programs are being put in place by Mark White, who was recently named executive director of TN -- also in July -- and who is expected to remain in that role.

Citing personnel and privacy issues, Kendzie declined to comment on who else is leaving SAP's TN unit, with the exception of CEO Nelson and several unnamed members of his senior management team.