Oracle Corporation et al v. SAP AG et al

Filing 1155

Declaration of Thai Le in Support of 1154 Opposition/Response to Motion In Limine filed byOracle International Corporation. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E, # 6 Exhibit F, # 7 Exhibit G, # 8 Exhibit H, # 9 Exhibit I, # 10 Exhibit J, # 11 Exhibit K, # 12 Exhibit L, # 13 Exhibit M, # 14 Exhibit N, # 15 Exhibit O, # 16 Exhibit P, # 17 Exhibit Q, # 18 Exhibit R, # 19 Exhibit S, # 20 Exhibit T, # 21 Exhibit U, # 22 Exhibit V, # 23 Exhibit W, # 24 Exhibit X, # 25 Exhibit Y, # 26 Exhibit Z)(Related document(s) 1154 ) (Howard, Geoffrey) (Filed on 5/10/2012)

EXHIBIT D

Participants
SAP:

•
•
•

Stephen Tseng
Thomas Ziemen
Uwe Wieditz

TomorrowNow:

•
•

Andrew Nelson: ex-CEO; Responsible for Support Operations (Bryan, TX)

•

Others: as needed from TomorrowNow Management team in Bryan, TX

Seth Ravin: ex-President; Responsible for Business Development & Sales
(Pleasanton, CA)

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Participants

Thomas Ziemen
Vice President Service Solution Management,
representing Gerd Oswald as member of SAP’s executive
board responsible for Service & Support and IT
Uwe Wieditz
Vice President AGS Product Support (Installed Base
Maintenance and Support)
Stephen Tseng
Director AGS Solution Support Americas,
nominated to join the TNow Management Team as
SAP’s representative and key contact for the Field and
Service & Support organization

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Introduction
On behalf of Gerd Oswald, member of SAP’s executive board
responsible for Service & Support, welcome to the SAP
community and eco-system
Merger presents a huge opportunity for us
Facing an exiting adventure with the unprecedented launch of
our Safe Passage offering which surprised the analysts and
especially ORACLE
Battle for the 12.500 PSFT customers has just started
TNow will serve as major cornerstone of our Go-to-market
strategy as our key Service-delivery unit
Scale, build-up and prepare the organization accordingly
Let’s do it Together Now !!!

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Objective and Deliverables from Meeting

• Define a detailed working version of TomorrowNow Business
and Operation Plan (all functions)

• Define and Request approval for Hiring Program globally from
Gerd Oswald based on plan

• Define Support Operations Integration Plan (Process,
Infrastructure and Service Integration)

• Identify IT Requirements to provide Transparency between SAP
and TomorrowNow for Pipeline and Reporting

• Educate and Align TomorrowNow’s understanding of SAP
Services and Support Philosophy and Execution

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“Sync Points” with Gerd Oswald

Tuesday, 25 January 2005
18:30 - 19:00 CET
Wednesday, 26 January 2005
18:30 - 19:00 CET

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Agenda for Tuesday, 25 January 2005 - Morning
Day 1 - Morning - TomorrowNow Infrastructure Overview and
SAP Services Overview
08:30-08:45

Agenda Overview and Introduction

08:45-09:30

TomorrowNow Sales and Pipeline Management Process and
Infrastructure (A. Nelson/ S. Ravin)

09:30-10:30

Working Session: Reporting and Contract Management Process
and Infrastructure Requirements

10:30-10:45

Coffee Break

10:45-11:30

SAP Services and Support Organization, Methodology and
Philosophy (Tseng/Wieditz)

11:30-12:00

Review IT and Sales Management findings with Gerd

12:00-12:45

Lunch

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Agenda for Tuesday, 25 January - Afternoon
Day 1 - Afternoon - SAP Strategy and Planning for
TomorrowNow
12:45-13:45

TomorrowNow Support Methodology and Process (A. Nelson)

13:45-15:00

SAP Safe Passage Proposal (10%/17% offering) (Ziemen)

15:00-16:00

TomorrowNow Review of Business Opportunity for PSFT/JDEC
Support Maintenance (Ravin)

16:00-16:15

Coffee Break

16:15-17:30

Working Session: Define Short and Long Term Business Plan
(Lead: Ziemen, Participants: All)

17:30-19:00

Working Session: Define Hiring Plan and Headcount Proposal
(Location, Profile, Recruitment) (Lead: Tseng, Participants: All)

19:00-???

Working Dinner to Prepare Proposal to Gerd Oswald Approval of
Business Plan and Headcount (Lead: Tseng, Participants: All)

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Agenda Wednesday, 26 January 2005
Day 2 - Morning - Knowledge Transfer and Alignment
07:30-08:45

Review with Gerd and others (HR?) for approval (material will be provide to
Gerd by morning in Walldorf) (Tseng/Ziemen/Wieditz)

08:45-10:00

Working Session: Support Operations Alignment Planning (Lead: Tseng,
Participants: All)

10:00-10:15

Coffee Break

10:15-11:30

Define Knowledge Transfer Plan for TomorrowNow on SAP Processes and
Methodology (All)

11:30-12:00

Lunch and Update to Gerd on Support Operations Alignment

Day 2 - Afternoon - Wrap-Up and Detailed Planning for Execution
12:00-14:00

Working Session: Draft Detailed Project Plan for each of Working Sessions
(Participants: ALL)

14:00-14:15

Coffee Break

14:15-16:00

Working Session: Continuation from earlier working session
(Participants: ALL)

18:30-21:00

SAP/TomorrowNow Team Dinner (Location: TBD)

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TomorrowNow
Integration Meeting
25-26 January 2005

Appendix:
Action Items/Open Issues
Next Steps

10

Key Deliverables from the Workshop
Service Portfolio / Offering
Maintenance Stratetgy, Consulting Services, Hosting Services

Revised Business plan for 2005+
by Product Line and Line of Service

Operational Model
Organization Structure
Process Models (e.g. Request Mgmt., Notes DB, Change Mgmt.)
Engagement & Collaboration Models

IT infrastructure Concept (CRM, Service, Backoffice)
Ressource plan
Locations, Headcounts, Skill sets,
Global Hiring Program

Investment plan
Capital increase

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Action Items: Maintenance Strategy

PSFT Maintenance Strategy
PSFT Release Strategy: Major/Minor Releases
PSFT release and maintenance planning (esp. end of dates)

Required Infos prior to signing a contract
modules, database, OS, degree of modification
Customer evaluation, Risk assessment

SAP’s maintenance strategy for PSFT
Target date for terminating PSFT maintenance: 2010 + x
Adopt 5-1-2 concept
Adaption of TNow concept (10 years offering)

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Action Items: Revised Business Plan

Key Assumptions
Targeted Customer segments
…

Scenario Planning
Conservative, most likely, aggressive

Revenue and Cost Planning

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Business Planning Overview
Key Assumptions

Revised Serice Revenue Planning

Average Deal Size:
10% model -> 75 kUSD
17% model: -> 127,5 kUSD

Cumulated Service Revenue 2005 - 2012 in kUSD
Cumulated Service Revenue 2005 - 2012 in kEUR

Deal Split: 30/70 -> on average
100 kUSD per Customer

TomorrowNow, Inc.
DCF-Valuation

Actuals
2002
kUSD

9.417,2
7.080,6

Actuals
2003
kUSD

Actuals
2004
kUSD

Forecast
2005
kUSD

Forecast
2006
kUSD

Forecast
2007
kUSD

Forecast
2008
kUSD

Forecast
2009
kUSD

Forecast
2010
kUSD

Forecast
2011
kUSD

Forecast
2012
kUSD

Profit and Loss-Statement
Consulting Revenue

461.5

1,513.0

2,647.1

5,029.5

8,550.1

12,825.2

15,390.2

18,468.3

20,315.1

22,346.6

23,240.5

461.5

1,513.0

2,647.1

5,029.5

8,550.1

12,825.2

15,390.2

18,468.3

20,315.1

22,346.6

23,240.5

-272.6
-58.1

-917.6
-105.8

-1,250.4

Total Cost of Services

-330.8

-1,023.4

-1,250.4

-2,514.7

-4,275.1

-6,412.6

-7,387.3

-8,680.1

-9,345.0

-10,056.0

-10,458.2

Gross Profit

130.7

489.5

1,396.7

2,514.7

4,275.1

6,412.6

8,002.9

9,788.2

10,970.2

12,290.6

12,782.3

-214.6
-4.4
-70.7

-496.2
-13.5
-136.3

-838.1
-65.2
-398.0

-1,609.4
-165.0
-754.4

-2,736.0
-355.7
-1,282.5

-3,975.8
-611.7
-1,795.5

-4,617.1
-790.9
-2,000.7

-5,540.5
-793.9
-2,216.2

-6,094.5
-714.1
-2,437.8

-6,704.0
-657.0
-2,458.1

-4,648.1
-620.8
-2,324.0

Operating Expenses

-289.7

-646.0

-1,301.3

-2,528.9

-4,374.2

-6,383.1

-7,408.7

-8,550.6

-9,246.5

-9,819.1

-7,593.0

Operating Income

-159.0

-156.4

95.4

-14.1

-99.2

29.5

594.2

1,237.6

1,723.7

2,471.5

5,189.3

Interest Income
Interest Expense

0.5
-2.1

0.0
-18.0

15.7
-23.4

10.1

17.0

23.9

32.5

44.9

59.1

74.2

63.9

-160.7

-174.4

87.7

-4.1

-82.1

53.5

626.7

1,282.6

1,782.8

2,545.7

5,253.2

0.0

0.0

-35.1

1.6

32.9

-21.4

-250.7

-513.0

-713.1

-1,018.3

-2,101.3

-160.7

-174.4

52.6

-2.4

-49.3

32.1

376.0

769.5

1,069.7

1,527.4

3,151.9

Total Revenue
Direct Wages and related Costs
Indirect Costs

Sales and Marketing
Depreciation and Amortization
Other operating Expenses

Income before Income Tax
Income Taxes
Net Income
Financial Information Provided by TomorrowNow Management
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Operations
Support Model

TomorrowNow offers a limited support policy covering legislative/regulatory updates and “critical issue”
fixes to small end user bases in less complex environments
Support fees are 50% of the PeopleSoft support price (9 to 10% of license fees)
TomorrowNow’s sales model focuses on identifying customers with mature and stable systems, primarily
PSFT 7.x customers, with a very limited history with PSFT 8.x customers (a much more complex solution)
Pitched as "insurance policy" support - provide the basic support to keep existing systems current, low level of
interaction, depth of knowledge of customers when engagement occurs (which is not frequent)
Leading edge customers (i.e. Schwab) are not the type of customer TomorrowNow can service, average deal
sizes are $50,000, (reflecting initial customer license fees of approximately $1 million)
Method of Delivery

Access to Peoplesoft system is based on a DEMO system non-production copy (install with environment
characteristics like customer) which works for stable environments (will not work for newer version or recently
implemented modules)
TomorrowNow functions as an independent contractor under the customer license agreement, the liability of
providing system access is pushed onto the Peoplesoft customer

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TomorrowNow, Inc. : Company Overview
Business Description

Company Facts

Headquarters:
Status:

Private

Website:

www.tomorrownow.com

Chairman:

Andrew Nelson

Number of Employees:

33

2004 Revenue:

$2.65 million

Operating Income:

TomorrowNow, Inc. is a professional services firm that
provides critical support services to organizations
using PeopleSoft Enterprise application software
for Human Capital Management, Financials and
Supply Chain Management, and Student
Administration.

Bryan, Texas

$95,400

TomorrowNow Support Services provides tax and
regulatory updates, 24x7 around-the-clock product
support, and product fixes to organizations using
PeopleSoft Inc.’s products.
TomorrowNow serves the support needs of 54
organizations operating in the United States and
Canada.

2004 Operating Margin: 3.5%

Founded in 1999.

Customers

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SWOT Acquisition Analysis
Strengths

Weaknesses

Very short time to market for offering and announcing
service offering
"No frills" model makes sense for a segment of
customers
This company has two years of experience building a
maintenance and support model
Targeting stable and mature PSFT releases and
limiting the complexity of the service, appears to be a
successful model

Management is not sophisticated
Customers have been offered 10 year support terms,
discouraging upgrade
Solely focused on U.S./Canada market
JD Edwards support practice is just starting
TomorrowNow has limited experience supporting
PSFT 8.x customers
The bulk of TomorrowNow personnel are outside
Austin, Texas
The TomorrowNow model is not unique - a similar
model could be replicated by another company

S

W

Opportunities

Threats

Oracle's deal assumptions are challenged by this
support model - losing support revenue stream forces
actions or reactions and is a distraction
Oracle's legal challenges to TomorrowNow's ability to
provide derivative works/support will require Oracle to
also sue its customers - a difficult situation for Oracle
There is a level of critical mass with expertise delivering
a no frill support model, but scaling is heavily reliant of
adding new headcount

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The access rights to the Peoplesoft software is very
likely to be challenged by Oracle and past operating
issues may be a serious liability if Oracle challenges
(i.e., offsite production copies and the form of
delivery of regulatory updates may be subject to
Oracle challenge)
The "no frills"/lower cost model is at odds with SAP's
maintenance model - this conflict will create issues
among PSFT and SAP customers
Its unclear if a "no frills" model is appealing to the
broad PSFT customer base or the PSFT customer
base that are most successfully converted to SAP

O

T

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Acquisition Structure, Due Diligence and Indemnities
Acquisition Structure

SAP AG
100% of Stock

$8 -10 MM Cash

SAP AG, or a wholly-owned affiliate,
acquires 100% of the stock of
TomorrowNow, Inc., for cash, subject
to representations and warranties of
the stockholders and appropriate
indemnities

TomorrowNow, Inc.,
a Texas corporation

SAP will leave Texas corporation in
existence as a liability shield for any
potential claims

Due Diligence

All offers would be non-binding and subject to complete due diligence, areas of primary
concern and focus include:
Legal
A full and complete
assessment of the legality of
the service model and the
method of delivery by
internal and external
counsel.

Financial
A full assessment of the financial
results, accounting practices and
internal controls, including an
financial integration assessment
and Sarbanes-Oxley internal
control and reporting issues.

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HR
A full assessment of the skills,
salaries and benefits offered by
the Company.

Potential Operational Structure
Operational Model

Build upon TomorrowNow framework by enhancing service offerings

New Offering providing same
level of service as SAP at SAP
standard rates

New Offering to assist in
migration to SAP solutions

Likely need someone from
outside TomorrowNow

PSFT and JDE Service Offerings

Platinum

Gold

Maintenance and Support

Likely need someone from
outside TomorrowNow

Maintenance and Support

Migration Services

Continue offering same level of support and maintenance TomorrowNow offers
to its customer base with same pricing model (9-10%) of license fee
TomorrowNow Management Operates
Offer 2-year employment agreements (containing noncompetition and non-solicitation restrictions) to Andrew Nelson,
CEO and Seth Ravin, President
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TomorrowNow
Integration Meeting
Brief Update Jan 26

Thomas Ziemen / Stephen Tseng

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Organization and Infrastructure
Organization
Support Organization
Management and Support Teams should be kept as is
Deep Knowledge and Expertise on PSFT Enterprise to be extended to
PSFT Enterprise One and PSFT World
Locations/Facilities can be scaled up

Sales Organization
TNow’s Sales Organization should be kept as separate virtually integrated
SAP US Sales Team
Lead generation must be driven by joint pipeline owned by SAP Americas

Infrastructure
Salesforce.com subscription for Contact Management
Should be integrated in SAP CRM Solution

Lotus Domino based Solution for Customer, Pipeline and Contracts
Should be integrated in SAP CRM Solution

Lotus Domino based Solution for Service Automation
Workflow with e-mail generation and automatic message routing to be kept
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TNow Service Offering Programs
3 Service Programs offered
Program 1:
Launched Mid 02, only for Retired releases (7.0x, 7.5x), PSFT limited
maintenance, TNow additional offering (e.g. regulatory updates)
Program 2:
Launched Mid 03, only for Retired releases (7.0x, 7.5x), TNow only offering for
50% of regular PSFT maintenance fee
Program 3:
Launched Mid 04, for all PSFT full supported 8.x releases (up to 8.9), TNow
offering for 50% lower fees, “essential fixes” only, Upgrade events
Program 3 for J.D. Edwards:
Lauched End 04, for XE, 8.x and World customers, like program for PSFT

Key Figures
Supporting 54 customers today (only mature systems in stable production mode)
Receiving approximately 6 messages per customer and year
(less than 700 in 2,5 years)
Only 10% of calls related to PSFT Tools/Technology, covered via work-arounds

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TNow Service Processes in detail
Client Onboarding
Support Portal Setup
Build Vendor-based Software and Support Library
Acquire/Process Client Software (codeline accuracy, License Validation)
Installing, Fix-/Data-Mastering the Baseline Environment

Proactive Tax and Regulatory R&D (Critical Support) & Retrofits
(Extended Support)
Proactive Research, Issue Validation and Scoping Changes
Development and Testing
Fix Packaging and Delivery (CD, Web Publishing, Client Experience)

Reactive 24x7 Case Support (Problem Resolution)
Client-branded website for reporting case
Support Response Router (SRR)
Blackberry-enabled SSR and SAS secure websites

Platform Certification Testing
Upgrade Support

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Business and Resource Planning (1)
Customer base for TNow Maintenance Services
54 existing TNow customers, 200 planned for 2005 including JDE,
up to 800 in 2009
2000 joint SAP/PSFT customer as primary focus, 300 covered in 2005
Overall 500 customers in 2005
Scenario 1: 2000 customers in 2009 (2,5x original TNow planning)
Scenario 2: 4000 customers in 2009 (5x original TNow planning)

Planning assumptions
PeopleSoft Enterprise (20 FTE per 100 customers)
15:1 customers per Primary Support Engineer, 7 PSE per 100
7,5:1 customers per Development Support Engineer, 13 DSE per 100

PeopleSoft Enterprise One and World (30 FTE per 100 customers)
10:1 customers per PSE (in 2005/2006), 10 PSE per 100
5:1 customers per DSE (in 2005/2006), 20 DSE per 100
Assuming PeopleSoft Enterprise planning ratios for 2009

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Business and Resource Planning (2)
Resource (FTE) calculation (Scenario 1, Scenario 2 doubles)
Support 300/2005, 600/2006 PSFT Enterprise customers
60 FTE in 2005, 120 FTE in 2006

Support 200/2005, 400/2006 PSFT Enterprise One and World customers
60 FTE in 2005, 120 FTE in 2006

Overall 137 employees in 2005, 270 in 2006, …, 450 in 2009

Hiring Plan
Assuming 5-6 month ramp-up time for new hires
Program 2005:
Existing: 47 (30 PSE/DSE), incl. management, sales, IT and administration
Hiring 90 people, 35 PSFT and 55 JDE, till end of march 2005
Staff needs to be productive by Oct 1 2005

Program 2006:
Hiring additional 133 people (incl. management, IT, administration) till end of
september 2005
Staff needs to be productive ba april 1 2006
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Business and Resource Planning (3)
Primary and Development Support Locations
Americas (120+)
Extend Bryan Support and Development and keep existing Remote Support
Locations => 50+
Build up Atlanta and Dallas Support Center => 30+
Build up Denver JDE Development => 20+
Build/Extend Pleasenton Support and Development Center (evetually move to
Palo Alto) => 20+

Europe (60+)
Build Amsterdam Support Center => 15+
Build Madrid Support Center => 15+
Build Dublin Support Center => 15+
Build UK Support Center => 15+

Asia (60+)
Build Singapore Support Center => 15+
Build Bangalore Support Center => 30+
Build Sidney Support Center => 15+
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