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Ex-partner charges Oracle with waging 'systematic attack' against third-party support
- — 07 February, 2013 21:18
Former Oracle partner CedarCrestone is alleging the vendor has engaged in an "unlawful and systematic attack" against the third-party support market and has a monopoly on support revenue.
Oracle terminated CedarCrestone's partner license last year and filed a lawsuit claiming it was providing third-party support for Oracle's software in an illegal manner. The allegations were similar to those Oracle lodged against former SAP subsidiary TomorrowNow and Rimini Street, two other third-party support providers.
CedarCrestone had been providing implementation services for Oracle applications as well as tax and regulatory updates for the software. The latter is of primary interest to customers that go off vendor support and contract with a third party, as they want to keep their systems in compliance but have little desire to upgrade, which is only possible legally with vendor-provided maintenance.
Oracle's suit claimed that CedarCrestone was using Oracle's own updates as a "starting point," and that it lied to customers, saying it had developed them independently and wasn't in any violation of intellectual property. CedarCrestone also used unauthorized copies of Oracle software, according to the suit, which is filed in U.S. District Court for the Northern District of California.
In a response filed last month, CedarCrestone denied it engaged in any "'misappropriation' or "stealing" of any Oracle intellectual property, any unfair competition against Oracle, or any wrongdoing of any kind." CedarCrestone also maintains Oracle had no right to terminate its partnership.
Moreover, Oracle has unlawfully achieved an "overwhelming monopoly share" in what otherwise would be a free market for tax and regulatory updates on its software, according to CedarCrestone.
By offering tax and regulatory updates only in tandem with its software and software updates, "Oracle is able to charge prices ... that are significantly higher than the competition," it adds. This "unlawful tying" has done harm to CedarCrestone, according to its suit.
In addition, "for many customers who use older versions of [Oracle's] PeopleSoft applications, the tax and regulatory support and updates offered by Oracle are not even compatible with those customers' software," CedarCrestone's response states.
But in a filing this week, Oracle asked the court to dismiss CedarCrestone's argument.
"As a matter of law, there is no customer lock-in because customers have all the information they need to make an informed decision at the time of the initial license sale and that Oracle has not changed its maintenance program policies after the fact," the filing states. "If customers don't like Oracle's maintenance pricing and policies, they don't have to buy Oracle software."
"Nothing in antitrust law or economics requires a firm to offer an a la carte menu of every conceivable component of its products and services just because a customer might occasionally wish to purchase some of them separately, or to supply them itself," Oracle added. "To the contrary, antitrust law presumes that if a bundled offering is unwanted, the market will take care of the problem."
Maintenance fees carry extremely high profit margins for vendors such as Oracle, who are loath to see a major third-party support market emerge. It's believed that the outcome of Oracle's lawsuits against Rimini Street and CedarCrestone could provide clearer ground rules and depending on what happens, potentially spark the industry's larger systems integrators to get in the game.
Oracle won a substantial settlement against SAP in connection with TomorrowNow, but that case has yet to be fully resolved. It may be a substantial amount of time before the Rimini Street case concludes as well.
While it's difficult to predict how they will turn out, such legal disputes do provide the benefit of "shining a spotlight on vendor maintenance programs," said analyst Frank Scavo, president of consulting firm Strativa.
"Buyers need to understand the long-term cost of ownership for any ERP product," Scavo said. "Many buyers negotiate hard on the initial software license cost, but accept the maintenance fees as a given. They don't realize that over a five-year period, maintenance fees can equal or exceed the initial license cost. Many buyers do not fully take those costs into account. They should."
Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com