SAP co-CEO McDermott co-Apologizes to Oracle

SAP quickly moved through some of its key witnesses Monday, including two Oracle executives, three customers, and the company's co-CEO Bill McDermott, who apologized to Oracle for his company's actions. While much will be made of how Oracle attorney David Boies extracted the apology during cross examination, in fact McDermott began apologizing earlier in his testimony.

And although McDermott was contrite, he, like other SAP executives before him, managed to distance himself personally from TomorrowNow's massive copyright infringement exercises -- tallied at 5 million files by Judge Phyllis Hamilton in her instructions to the jury. Unlike former SAP chairman Henning Kagermann and executive board member Gerd Oswald, who don't recall a thing, and Werner Brandt, who essentially claimed SAP was not at fault, McDermott simply explained that he had nothing to do with it -- his job was to get SAP's software sold, and to the extent that the acquisition of TomorrowNow could help, fantastic.

But McDermott went even further, saying that he had never really believed in the value of TomorrowNow, at least insofar as it enabled SAP software sales. "I always thought they were a rounding error and a distraction," he said. When asked why he never argued against the acquisition, McDermott said he wasn't part of the decision-making process. "I read the marketing words . . . . I got behind the program to create interest [in SAP software]."

When asked if it was a mistake to buy TomorrowNow, McDermott replied: "Look at the fact that we're all here. They were doing things that needed more scrutiny." He added that TomorrowNow damaged SAP. "I'm sorry for that," he said.

When Boies got his turn, he pressed McDermott further, asking whether any of the employees responsible had been punished. They hadn't, prompting Boies to ask "what's taking so long?" McDermott said his focus has been on the trial, and the people will be dealt with later. Boies wasn't buying it: "Couldn't you have done both?"

Boies then asked whether SAP had ever apologized to Oracle, to which McDermott responded that it hadn't, and then took the opportunity to do so: "I am sorry to Oracle." Boies responded: "I think it's important that that sort of thing happen." McDermott said: "I agree with you." I thought I saw Safra Catz' knees buckle just a little.

It was a warm moment, if not a bit embarrassing for McDermott, but it also very clearly established for the jury that SAP has wronged Oracle -- a point that may have been lost amid all the confusion created by other SAP board members. Another subtle coup for David Boies.

McDermott maintained that SAP would have insisted on paying a "running royalty" for Oracle software licenses. He pointed out that this is the arrangement his company has with Oracle's database product; Boies pointed out that SAP pays a lump sum amount for its Oracle Java license. And round and round they went.

There were plenty of other developments Monday, including some juicy Instant Messages between TomorrowNow employees, mostly dealing with the panic of having been caught; in fact in one exchange, TomorrowNow executive Shelley Nelson asks about the company's automated software having crashed Oracle's support servers. "Message I'm getting this morning is we crashed Oracle website and made ourselves visible when we wanted to be under the radar," read one piece of the exchange.

SAP played a videotaped testimony from Juan Jones, who headed up Oracle's North American support. Mostly Jones is asked to explain e-mails in which he consistently denigrates Oracle customers who don't want to purchase its third-party support. Besides calling them "bastards" or "laggards," he truly believes that they just don't see the value of Oracle's full offering; mostly he just indicates that they can't afford it, and probably aren't worth having as customers anyway. (SAP's McDermott agreed that some of these were not necessarily high value customers -- meaning customers who would buy SAP software.)

"To be clear," one e-mail read, "we want every renewal, but if TomorrowNow fills up with unprofitable laggards, then I'm not sure that's actually a bad thing in the medium/long run." In another scathing e-mail, Jones wrote: "Let the bastards dream of reducing their maintenance fees. I just finished telling Toyota that we're not going to reduce their bill. Not only that but they need to buy more software from us."

Perhaps the most embarrassing, if not useless, e-mail contained a smack-down of Rimini Street, another third-party support provider Oracle is tangled in a lawsuit with, and its CEO Seth Ravin: "F Seth and his Rickety Street, which has yet to be paved," the e-mail read.

Finally, SAP played video depositions from three separate customers, each of whom had moved away from Oracle for different reasons. Lexmark said it chose SAP over Oracle based on a 300-point evaluation process that did not involve TomorrowNow's service; McLennan County Texas simply wanted support for older versions of software that Oracle had stopped supporting, and turned to TomorrowNow; and Sara Lee acquired Earth Grains, and consolidated its platforms (Oracle) onto SAP. It is likely that these customers are being used to demonstrate some of the reasons customers would leave a major software company like Oracle; or these customers are in dispute in counting Oracle's lost customers.

Tuesday will begin the testimony of SAP's damage expert, which means that closing arguments could take place as early as Friday.

Fritz Nelson is the editorial director for InformationWeek and the Executive Producer of TechWebTV. Fritz writes about startups and established companies alike, but likes to exploit multiple forms of media into his writing.

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