John Paczkowski

Recent Posts by John Paczkowski

Oracle-SAP Trial: Ellison Swaps Katana for Poison Darts

If Oracle CEO Larry Ellison’s testimony today in the SAP trial lacked his usual flair for enthusiastic bloodletting, it was only because he put aside his standard samurai tactics in favor of a more subtle ninja approach.

On the stand in an Oakland, Calif., courtroom today, Ellison was such a picture of moderation and restraint that you almost wondered if his handlers had shot him up before his appearance–like sedating a dog for air travel. As one SAP rep told me, Ellison “was anti-climatic given his vituperative statements of the last weeks.”

Which is true. But his testimony was still quite damning–to my ears anyway. For one thing, he said that Oracle could have charged SAP $4 billion to license the programs that its TomorrowNow subsidiary wrongfully downloaded. For another, he said Oracle would have had trouble paying its employees if it allowed its rivals unfettered access to the software and support libraries at issue in this case.

“I’m not sure we would go out of business but pretty close to going out of business,” Ellison said during questioning by attorney David Boies. “If they could get that software for nothing, we’d have a hard time paying 100,000 employees.”

If that was the case, then why didn’t Oracle make a bigger stink over SAP’s acquisition of TomorrowNow when it was first announced? SAP’s legal team was quick to pick up on this and hammered Ellison, claiming there’s “not a shred of documented evidence” demonstrating Oracle’s concerns. But they didn’t get much of anywhere with that because it turned out there is some.

“When SAP announced the TomorrowNow acquisition,” Ellison said, “I made a public statement….I thought they might cheat around the edges in terms of our copyrights…and I publicly warned them that while they have every right to support our software, they have to respect our intellectual property–[they] can’t just redistribute it without paying for it.”

And, indeed, Ellison did do this during the company’s 2005 analyst day. “SAP has every right to provide support for PeopleSoft applications as long as they don’t violate our intellectual and contractual property rights,” he said. “It might make it awkward for them. That’s our intellectual property, and they should be cautious.”

Driving those remarks was Ellison’s fear at the time that with TomorrowNow, SAP might do Oracle real harm. “I thought this was a major program with a huge potential to do severe damage to Oracle,” Ellison said today, adding that his vision of how SAP planned to go about it wasn’t quite how things played out. “It was a brilliant idea to take our customers, but to execute it properly they had to go out and hire hundreds, if not thousands, of engineers to maintain PeopleSoft and JD Edwards and Siebel. That was going to be expensive. I certainly didn’t think they would simply take our intellectual property and then resell it to their own customers. I never thought that could happen.”

SAP’s attorney, Tharan Lanier, challenged Ellison on these points as well, suggesting Oracle is exaggerating when it claims that TomorrowNow’s infringement jeopardized as much as 20 to 30 percent of Oracle’s customers from its acquisition of PeopleSoft and 10 percent of those from the later acquisition of Siebel Systems. And in the end, Ellison conceded that only about 350 customers were lost as a result of TomorrowNow’s infringement. But he also managed to again suggest that potential losses were far, far greater.

“I think taking our intellectual property is a two-edged sword,” he said. “For [SAP] it means they have access to all our engineering output. They have regulatory updates at the same moment we have them. They have new versions of our software at the same time we have them. They have bug fixes at the same time we have them. So they should be able to provide the same quality of support that we’re providing except that they’re doing it at a very low cost, while Oracle bears the cost of all that engineering.”

The other side of that sword is running an irrational risk by taking our software. That’s a risk I certainly would never, ever undertake.”


[Image credit: Pre-Ellison Samurai image by Artem Mirolevioch]