I like Joe Nocera, and usually think he hits the nail on the head. But his Saturday column about HP’s new CEO, Léo Apotheker, and his role in the lawsuit between Oracle and Léo’s former company, SAP, over SAP’s TomorrowNow acquisition, swings and misses by a country mile.
The problems in Joe’s main thesis, that Apotheker is tainted by his association with allegations that TN committed “the most serious business crime that you can commit” – a moment of impressive hyperbole that tries to compare the alleged theft by TomorrowNow of Oracle’s IP with crimes like destroying the US-banking and mortgage system, annihilating trillions in investor equity, and the likes of Bernie Madoff – are curious considering the usual quality we expect from Joe.
Let’s start with the main allegation, one that looks really begs the question of what Joe is really up to. Nocera, according to his column, recently became aware of something that I had to read twice before I was sure that what I saw was really in print in front of my eyes. “As a member of SAP’s executive board, Mr. Apotheker clearly knew about the theft.”
I’m going to give Nocera the benefit of the doubt and assume that he really meant the following: at some point after the IP theft allegations were investigated by SAP, Apotheker knew that the theft of Oracle’s IP had occurred. Bear in mind that the theft has already acknowledged by Apotheker’s former boss and co-CEO, Henning Kagermann, so it would make sense that the entire executive board knew about it as well.
But there’s another interpretation that is more troubling – does Nocera think Apotheker knew all along that IP was being stolen by TN? He seems to think it’s possible, and then quotes that most objective of all sources, Oracle’s amended complaint against SAP, to prove his point. Quotes out of context, I should say. Or, rather, quotes without context. Which I will now provide.
Nocera cites the two main smoking guns of the Oracle lawsuit as evidence of his claims of what Apotheker knew and when he knew it. Both have clearly been lifted from the complaint without being vetted by any objective party.
Number one is that Nocera claims that a January 2005 presentation to the SAP board proves that SAP’s board knew that TN’s business model “depended on stealing Oracle’s code,” mostly because the presentation requests that a legal review of TN’s practices be undertaken. According to Nocera – and he says this with a throwaway statement that makes it clear he never actually tried to report the fact – this legal review never took place, because the deal closed shortly after the January 2005 presentation.
Smoking gun number two was the comment in the amended complaint that TN used a “nonproduction” (sic) copy of PeopleSoft code in order to do its work. Nocera equates this term non-production to “unauthorized”, once again revealing… well, let’s just say he doesn’t understand enterprise software.
Smoking gun number one has a major problem with it – while outright IP theft is illegal, TN’s business model as represented to SAP’s board, and the public, at the time of the acquisition was arguably very legal. Arguably is the right term, because while third party maintenance has always been done in the industry, particularly by large SI firms, the application of the legal basis for this work had never been extended to a business that only does third party maintenance, like TN.
It’s important to note, and Nocera misses this completely, that the business model TN was supposed to have is not what the Oracle lawsuit now alleges was the model used to commit a crime. The amended lawsuit clearly states that TN stole inappropriately, but the larger issue of whether a third party maintenance company can use IP licensed by a customer from a software vendor to service that customer (and only that customer) is still up for grabs. It may someday be ruled illegal, but that day has not yet arrived.
Indeed, Rimini Street, founded by TN’s founder Seth Ravin, runs exactly this kind of business. And while Rimini is being sued by Oracle, no judge has given Oracle injunctive relief to stop the practice. Which means it’s a trial-worthy issue of the law. Which means, at a minimum, if TN had just stuck to what it was supposed to be doing, SAP wouldn’t be in the mess it is now with Oracle.
So, yes, Apotheker knew what TN’s business was supposed to be about, and most likely looked at the January 2005 presentation as a warning about what legal battles SAP would have to fight – the one that Rimini is now fighting, about a very complex and opaque corner of contract law. But to imply that anyone on the SAP board knew that TN was illegally pillaging Oracle’s IP based on a few slim sentences in Oracle’s amended complaint is egregiously sloppy reporting.
The non-production issue is more silly by comparison, because it reveals that Nocera doesn’t understand that non-production instances are totally and completely authorized: these are the test, development, and training instances that every licensed user runs in addition to the production system that actually runs the business. Why this shocking, shocking issue of non-production systems is in the amended complaint at all is not explained by the complaint or Nocera. Third party service providers have access to non-production systems as a matter of course: you wouldn’t want to be testing an upgrade on your production system, would you?
Finally, Nocera’s skewering of Apotheker over TN and how Business ByDesign “flopped” shows how little he knows about the history of the acquisition and how SAP’s board operates. First, any discussion of the responsibility for the acquisition of TN would have to center around Shai Agassi, not Léo Apotheker. TN was Shai’s baby, he promoted it eagerly inside the company as an aggressive move against an aggressive competitor. Because the SAP board – unlike US-based boards – has clear functional delineations of responsibility, if any smoking gun was being held, or concealed, it would have been held by Agassi, not Apotheker. And, by the way, for the record Joe, Shai doesn’t have any smoking guns either.
Same with ByDesign – the person who held responsibility for this product was former board member Peter Zencke, not Apotheker. Again, at the board level, Léo would have likely deferred to Zencke on virtually every aspect to ByDesign, so to blame Léo is to not understand how responsibility is distributed at SAP.
So, we’re left with the gist of a column that not only doesn’t hold water, but is leaking like a sieve. The rest of what Nocera is trying prove, that the HP board has laid another egg, doesn’t have a lot left to support it. Nocera claims ethical lapses by Apotheker, but he supports them with the thin gruel of Oracle’s complaint and reportorial lapses that are astonishing in their magnitude. Too bad for all concerned.
Editor’s Updates:
- HP Chairman Lane Smacks Back at NYT’s Nocera: The Poison Pen Letter!
- SAP-Oracle TomorrowNow hubbub center of HP-NYT duel over Apotheker
- HP Scandal Sucks in New York Times Columnist Over Conflict of Interest
Finally, the Editor’s Note appended to the original NYT piece:
Editors’ Note: October 12, 2010
In the Talking Business column in Business Day on Saturday, Joe Nocera wrote about a lawsuit by Oracle against a division of SAP, claiming theft of intellectual property. Mr. Nocera learned after the column was published that Oracle was represented by the law firm of Boies, Schiller & Flexner, where his fiancée works as director of communications. To avoid the appearance of a conflict of interest, Mr. Nocera would not have written about the case if he had known of the law firm’s involvement.
Exactly accurate and right on all counts. Nocera cashed a check for his article, it would seem. I am uncertain that we need tabloid journalism to invade the tech sector. Nocera’s article belongs in Us Weekly.
I can confirm just how wrong Nocera is and how precisely your corrections hit the mark.
Well said Josh. Re: ByDesign, Leo was not involved in the development of BYD as you aptly pointed out. Peter Zencke led all development and he and Gerd Oswald were intimately involved in the go-to-market strategy because SAP viewed Services as intrinsic to deploying their SaaS solution (SAP hosting for instance reported up thru Gerd’s organization back then). Regional sales teams were formed that were dedicated to BYD sales and although they were under Leo’s organization, they were heavily influenced if not managed through the SAP Matrix…meaning there were multiple masters. The talent in these sales teams though is directly attributable to Leo’s prowess of a sales leader. And the fact that they were able to sell the solution is a testament to his team’s ability to sell a software solution that wasn’t ready for prime time. If anything he should be recognized for keeping SAP in the SaaS game when they didn’t have a SaaS product to sell.
[…] Zoli Erdos on October 12, 2010 TweetThis is just a quick Editorial note to draw attention to the very significant piece Josh Greenbaum published last Saturday. You may have missed it – who reads blogs on a weekend? But the post had […]