If you are trying to install SMSDOM 8.1.2 with Java 8 you will see an error saying Java 4 and above is required. If you have a fully working SMSDOM 8.1.2 with Java 7 and then uninstall Java 7 to install Java 8 when you run Liveupdate from the GUI you will receive the error "Could not locate installation directory".
Prior to SMS DOM 8.1.2, Java 7 was not certified. For versions prior to 8.1.2, please review TECH188687.
As stated in Oracle Java SE Support Roadmap, Long Term Support will be available. Java SE enhancements and critical bug fixes should be available under the Oracle Technology Network. Please consult Oracle's Technical Support, if you have further questions about Java SE supportability
Open the notes.ini file and change the path for SAVJava= line to point to the Java 8 bin folder. If this line does not exist, you can just add it to your notes.ini. Here is an example: SAVJava=C:\Program Files\Java\jre8\bin\
Now when you run LiveUpdate it will use this path and run using Java 8.