SAP Indirect Access: Duke Law Professor Says Fees Are Illegal

What is SAP indirect access? It’s data exchange between SAP and a third-party system that falls outside the realm of traditional user licensing. The terms of this kind of data exchange are typically not defined in the company’s licensing agreement with SAP.

What are SAP indirect access fees? They constitute SAP’s new way of dealing with 3rd party integrations to SAP.

But let’s just get to the punchline.  They’re illegal.  

Dr. Barak D. Richman, the Bartlett Professor of Law and Business Administration at Duke University School of Law, concludes the following in a Corevist-initiated study of SAP’s Indirect Access Licensing arrangements:

“SAP’s conduct can be anti-competitive under one of two antitrust theories: First, SAP may be engaged in illegally tying its ERP software and services with its accessory product, Hybris.  Second, SAP’s demand for third party license fees may constitute an illegal refusal to deal with other third-party accessory software providers.”

Dr. Richman summarizes by saying “In short, SAP’s conduct limits consumer choice, gives SAP an anti-competitive advantage in the ERP-accessory market, and undermines a currently competitive and dynamic marketplace for ERP accessories”.

No surprises here.

SAP is violating US antitrust laws.

SAP can say and do whatever they want to clean up their indirect access licensing models and contracts, but in the end, according to Dr. Richman, “SAP’s licensing contracts and intellectual property rights do not sanitize anti-competitive conduct.”

What that means in plain English is that Anti Trust laws trump contract and intellectual property laws.  In practice that means that SAP can sue (and maybe even win verdicts) Diageo and inBev for breach of contract, but the truth is that that contract is being used to violate Anti Trust laws, and that is illegal!

You simply can’t bully the market.  Our economy is built around the fact that you have to play nice.  It’s OK to compete, but you can’t take advantage of your size and economic position to stifle the market.

Back in May when I first reached out to Dr. Richman, I was looking for someone to provide me with the legal backing for what I knew had to be true.  Dr. Richman, and a team of his newly minted lawyers, have now produced a 25 page memorandum which spells it all out in gory detail.  Dr. Richman actually teaches Duke’s Anti-Trust course and this memorandum not only deals with the current SAP situation but is a great backgrounder on the finer points of the Sherman Antitrust Act.  It’s actually a fascinating read and almost makes me regret not having gone to law school….NOT.

Here is a link to Dr. Richman’s summary Cover Letter.  At the end of this post I’ll let you know how to get the full Memorandum.

So now what?

Where do we go from here? That’s the real question.

Ideally, SAP will continue down it’s empathetic path and do the right thing on their own accord.  That might happen eventually, but I don’t think the SAP ecosystem has the luxury to simply wait for that day to come on its own accord.  We need to help “nudge” SAP along the path.  The problem that we are all having is that SAP has a monopolistic hold on this market and it’s hard to nudge a monopoly.  But it can be done if we work together.

For starters, I think we all have to be equipped with the facts of the situation and have access to the resources we need to stay informed.  To that end, Corevist has sponsored this definitive Duke SAP Indirect Access Memorandum. Ideally, I’d love to see the industry titans that are not only effected by this topic, but who have the pocket change to pursue it, to take it from here.  For starters, if anyone could pass this blog post on to Marc Benioff at Salesforce I’d be greatly appreciative :-).  I think Rimini Street’s Seth Ravin, who has shown that he isn’t afraid to take on ERP vendors in the courts, would be a great ally in this cause as well.

I have been in touch with several Executives at some of our partners and competitors (yes, competitors) and they have agreed to underwrite this effort and will be distributing this Duke Memorandum to their own constituencies.  Needless to say, I will be making the Duke Memorandum available to all of our clients and prospects in the hopes that it will help them with their negotiations with SAP.

Lastly, Dr. Richman has offered to speak to any industry analysts and reporters who would like to learn more about the topic or perhaps even sponsor further research into the matter.  His contact information is in the Cover Letter provided above.

The bottom line is that we need to make sure that the topic of SAP Indirect Access Licensing is dealt with in a timely manner and in the light of day.

If you would like to have further discussions with me on the topic, or gain access to the full 25 page Memorandum, just drop me a line at sam.bayer@corevist.com.  Put “Anti Trust” in the subject line :-).

Onward!

Sam Bayer
Founder & CEO of Corevist