SAP makes play for hosted customer relationship management

Months after it said it expected to deliver one, SAP on Thursday announced its first hosted CRM software service under the mySAP CRM portfolio.

SAP said it is exclusively targeting it towards the mid to large enterprise market, which comprises the majority of its 100,600 installed base worldwide. Shai Agassi, president of SAP’s product and technology group made the announcement live from SAP’s office in Palo Alto, Calif. with a simultaneous broadcast from New York.

“There’s a lot of pent-up demand in those markets so we’re naturally going to serve where we think the most obvious opportunity is right now,” said Robert Courteau, president and managing director of SAP Canada. “It’s about going to a place where they’re going to value our on-demand opportunity.”

Courteau declined to comment further on SAP’s strategy on capturing market share in the small and medium business segment, where currently dominates.

Sean Rollings, senior director of product marketing at NetSuite, however, said it expected SAP to serve small and medium-sized businesses with its new product. NetSuite provides Web-based CRM, ERP and eCommerce software to the SME market.

“They’re trying to create a fortress SAP for their installed base and are obviously getting picked off by their competitors who’ve been very successful in bringing hosted CRM to people that only have the ERP back end,” said Rollings. “It doesn’t seem that they’re targeting new business and new companies.”

SAP is a latecomer to the hosted CRM market and is up against some stiff competition like, which was originally designed to be a hosted service, and Siebel, which brought out its equivalent product more than a year ago. More recently, Microsoft introduced Dynamics CRM 3.0 On Demand. Unlike Siebel, which was acquired by Oracle last September, and Microsoft, SAP is not tied to any one database.

SAP is offering its hosted CRM service starting at US$75 per user per month up to $125 per user per month (Canadian prices are equivalent). SAP’s pricing strategy is on par with competitors like NetSuite, which offers a similar service around the $75 mark.

Aside from affordability, one of SAP’s biggest concerns with hosted CRM is being able to make it seamlessly integrate with other applications,

“The technology should address processes and people needs rather than technology for technology’s sake,” said Joel Martin, vice-president of solutions advisory service at IDC Canada. “The corporations are demanding these resources be centralized rather than them being all over the map. That’s been the biggest challenge with marrying this borderless organization with all these disparate technologies.”

To achieve seamless integration, SAP is currently working with Microsoft on the Mendocino project to further integration with Microsoft desktop applications. SAP also has a set of applications called NetWeaver that allow users to integrate with other applications. In addition to working with Microsoft, SAP has signed numerous partnerships with large technology players like Cisco and IBM.

IBM, as part of an ongoing agreement with SAP, will provide on-demand application hosting services for the hosted CRM solution. At Thursday’s event, IBM Americas general manager Marc Lautenbach said SAP’s product speaks to an important set of needs in customers. Lautenbach broke these down into four categories: infrastructure, integration, investment and innovation.

“Integration is something that clients have been struggling with for some period in time,” said Lautenbach. “More and more of customers’ budgets are getting soaked up by integration.”

Likewise, IDC Canada’s Martin said constantly switching from application to application can result in lost productivity, redundancy in the processes, and, ultimately, an increased error rate.

“Having strong integration with the e-mail, whether its Lotus Notes or Outlook, it’s really critical for success with hosted applications,” he said.

Rollings, however, said SAP is only thinking of software as a service (SaaS) CRM. “That’s a big mistake,” he said. “Ultimately, where the software is going is for the suite.”

Rollings argues that SAP is making the same mistake that Microsoft did when it brought out its previous CRM software package over two years ago, which was an on premise solution.

“Bringing a hosted CRM package that is standalone or is just for an ERP backend is a day late and a dollar short,” he said.

SAP Canada’s Courteau, however, said CRM is becoming the front-end for enterprise processes both for the client and the customers.

“The same clients that want on demand are also the same ones that believe they’ll evolve to using an on premise approach to using CRM,” he said. “For us it’s evolutionary rather than a response to the other things that are happening in the marketplace.”

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