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IDC: SAP's Oracle fine will drive up enterprise IT costs

IDC: SAP's Oracle fine will drive up enterprise IT costs

SAP's £820 million fine over Oracle software and data theft is likely to be a blow to all enterprise software users because it will undermine the growing market for third-party support, according to IDC.

While SAP itself could ride out the costs of the ruling, the ruling will make CIOs and IT directors nervous of choosing third-party support, the analyst house warned today.

"If this judgment is upheld, it will put the future of third party maintenance in doubt and make software lifetime costs higher," said IDC research manager David Bradshaw.

SAP was handed the unprecedented fine by a US court, after a jury set damages following SAP's admission that its TomorrowNow maintenance subsidiary stole software and support documents.

TomorrowNow, which is now defunct, focused on providing maintenance for systems that had fallen out of standard vendor support.

Bradshaw said that while SAP "can afford" to pay the massive fine, the news represented a serious "loss of face" for the company. It also risked crippling business for other companies in the third party maintenance market, he said.

"The decision reinforces software vendors' ability to charge high fees for supporting systems that are out of standard maintenance," Bradshaw said. "It will reduce buyers' choice."

Bradshaw said many IT buyers are "unhappy with the level of charges" and the value delivered. Indeed, SAP faced its serious user arguments over maintenance costs for its own software, when it attempted to raise the charges last year. It backed down in the face of angry customer reaction.

As a result of the judgement, people buying support from different suppliers would feel "forced" to continue to pay the charges, Bradshaw said, whether or not they felt the charges represented value. "Their room for negotiation has been reduced," he said.

IT organisations need to rethink the systems they run and the support they buy, Bradshaw said.

"Users of third-party maintenance services need to prepare contingency plans," he said. "If you do not want to pay the original vendors higher fees, you need to ask whether you can manage without maintenance, or migrate off legacy systems that are expensive to maintain."

The SAP ruling also highlights another Oracle case against a third party provider, Rimini Street, which Bradshaw described as the largest independent such company in the US.

Forrester vice president Paul Hamerman argued in a blog that SAP remains in a difficult position on third-party support, facing the "same threat of revenue loss" as Oracle.

SAP, he said, "was unable to convincingly defend its entry into the third-party support business for fear of legitimising a business" that presents that threat.

Hamerman said third party support remained an important choice for users, but agreed with IDC that with the Rimini Street Case also looming it "potentially dampens customer interest" in non-proprietary support from the software vendors.

Another expert at Forrester, however - principal analyst Duncan Jones - argued that the Rimini Street case would not necessarily present the same outcome, and that the effect was worse for SAP shareholders than customers.

Jones said competition remained in the "rapidly growing" third party support marketplace. Regarding the heated competition, he added: "I want the major technology companies competing against each other as much as possible, both in terms of technology innovation and commercials," he said.


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