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SAP says it won't join the on-demand crowd
April 14, 2005
SAP, as previously reported, unveiled its hosted CRM service and trotted out several industry titans, such as IBM, as its new on-demand partners.
The software applications giant is looking to capture a slice of the ever-growing hosted CRM market, which includes pioneer Salesforce.com, archrival Oracle--which is getting a boost to its hosted CRM efforts via its Siebel Systems acquisition--and Microsoft, which in November announced its first subscription-based CRM offering.
With the debut of its SAP CRM on-demand solution hosted service, SAP says it wants to be a hybrid model aimed at large and midsize businesses.
The new service, priced at $75 per user per month, will offer such features as tools designed to be easily configured to manage sales, customers and contacts, and will offer synchronization to integrate desktop productivity applications.
"We started our planning by asking our customers what they needed," said Shai Agassi, president of SAP's product and technology group. "They needed continuous deployment options and a more strategic CRM...They wanted more than just a sliver of customer information. They wanted a full picture of the customer."
The company is banking on two features which it hopes will differentiate it from competitors. One is technology designed to allow multiple users of a company to share the same master copy of the software, yet allow each to use it on their own independent system. The goal is prevent all users from suffering a "brown out" during peak use, said Bob Stutz, SAP senior vice president of CRM products and strategy.
SAP also touted its hybrid model, which is designed to allow users to migrate from an on-demand CRM model to one in which they own and manage SAP software internally. The software giant aims to allow customers to take any customizations they have made to their SAP CRM on-demand system and transport it to locally managed system. The on-demand offering is also designed to integrate tightly with SAP's back-office software.
"They are going after existing SAP customers," said Rob Bois, an analyst with AMR Research. "We've talked to customers and while it is a nice checkbox option to have, it's not the primary criteria they use when selecting an on-demand solution."
He added that while customers who migrate to SAP's CRM licensed software from its on-demand offering will not face the hurdle of cumbersome data transformation issues, they would, nonetheless, still have to install the complex server-based software.
Agassi said customers may opt to migrate to its licensed CRM software should they desire very complex and distinct sales processes.
Dupont is one company that has signed up for SAP's on-demand CRM service. "We approached SAP with a problem of how to expose information in our legacy systems and SAP back office to our sales team," said Mike Michlovich, director of sales and marketing for Dupont IT. "We said it has to be inexpensive and can be quickly integrated."
More pieces on the way
With its announcement Thursday, SAP introduced the sales module of its on-demand CRM offering--the first of three phases that will be launched in the next six months. This phase is designed to offer customers the ability to manage their sales contacts, for example.
A second phase will be SAP Marketing on-demand, which is slated to launch in the next quarter, That will include such features as lead management and pipeline management. The third phase, SAP Service on-demand, will debut in the third quarter and handle such areas as call center management.
The monthly subscription service will cost $75 to $125 per user, depending on desired features, SAP said.
Bois noted that while most customers want the CRM sales component with contact management first, he noted few on-demand Siebel and Salesforce.com customers would likely switch to SAP until it has all three modules completed.
"It's not compelling enough for them to switch, when they can get these full features with Siebel and Salesforce now," Bois said.
SAP's initial offering lacks some of the more advanced features that competitors already have, Bois said. "SAP still has a lot of catching up to do, but it's a good first step," he said.
SAP has more than 30,000 customers and Bois estimated that 10 percent have purchased the companies licensed mySAP CRM software.
Overall, the hosted customer management software industry is grew to $600 million in revenues last year, according to analyst estimates, and is expected to grow 29 percent over the next five years, Bois said.
SAP is also partnering with IBM, which will not only help sell the SAP CRM on-demand offering, but will also provide the hardware and hosting infrastructure for the service. The companies declined to disclose their revenue-sharing arrangement.
Some competitors, meanwhile, said they are not concerned with SAP's entry into the hosted CRM market.
"SAP's entry into the on-demand market is a non-event. With more than six years experience in on demand services, Oracle On Demand is a mature offering," Juergen Rottler, Oracle On Demand and Support Services executive vice-president, said in a statement. "With the addition of Siebel Systems, Oracle is now the undisputed leader in Customer Relationship Management software and on demand solutions."
Other competitors expressed similar views.
"This will help the market grow and help us grow," said Phill Robinson, chief marketing officer for Salesforce.com.
He added SAP's hybrid concept is one that has not worked well for Siebel and that he expects SAP to encounter similar problems.
While SAP is focusing on the CRM market for its on-demand offering, the company has not ruled out the potential of expanding it to other parts of their business. But such a move would require the right market conditions, Agassi noted.
The market would have to be relatively immature, where it has not yet developed an established process for handling tasks. With a young market, such as on-demand CRM, most of the customers are using similar processes to handle needed tasks, he said.
And the other issue to consider is criticality of the task. Customers, for example, may be loathe to have their manufacturing or accounting processes on-demand and would prefer to keep them in-house, he noted.
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