New Legal Finding Against SAP: 'Guilty by Reason of Customization'

Dennis Byron

In the dog days of August here on Cape Cod, it's harder to find something to write about regarding enterprise software on a daily basis than it is to actually write it. It's summertime and the living is easy, blah blah blah. But not for bloggers.


My choices looked pretty bleak this morning as I scoured the Web for news over the last few weeks while I was on vacation. Let's see: Write my umpteenth post about enterprise software being too expensive? Is enterprise software good or bad for open source? Or I could write that enterprise software is doomed by software as a service!


And then this story from Wisconsin popped up and hit me across the forehead with all the subtlety of a two-by-four at a stick-ball game.


The Wisconsin state Supreme Court has ruled, according to this law firm, that packaged software isn't packaged (and therefore enterprises do not have to pay Wisconsin sales tax on it). Examples given were "SAP, Oracle, PeopleSoft, BAAN and JD Edwards" software -- not surprising since the case had been kicking around among the cheeseheads for over two decades. Three of the five companies cited in the legal descriptions no longer exist.


(Note to those of you outside the U.S.: The term cheesehead is most commonly associated with a popular U.S. football team based in one Wisconsin city but it is considered OK to call everyone that lives in the state a cheesehead because of its rich dairy history. They like it.)


I was surprised that there was no mention of software from what I assume is a Wisconsin packaged software favorite, Dairyland. Despite its name, Dairyland is a health care ERP package and the company that makes it is headquartered next door in Minnesota.


Seriously, the legal point is that if you have to customize a piece of packaged software significantly, including integration as a type of customization, it is really custom software. According to Demir Barlas over at TechTarget, the SAP customer in question incredibly paid $5 million for the license back in the 1990s and then spent over $40 million to change R/3.


Thus SAP continues its Levi Straus with its pants down, Waste Management dumpster diving, delay-in-BBD losing streak. I wonder if SAP argued in court that R/3 is really packaged. How soon before Oracle runs an ad exposing the fact that SAP was found "guilty by reason of customization?"


And who gets to decide how significant "significant" customization is? Does it apply to the coding I have to do to Quicken/QuickBooks to set up my accounts? What about setting up all those confusing fonts in Word and e-mail options in Outlook?

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