SAP Preps CRM Software Services Announcement

Company officials declined to discuss the business model ahead of scheduled events. If SAP reports it will launch the service as expected, the German enterprise software giant will go head–to-head with Salesforce.com, a leader in the SaaS market.

George Hu, Salesforce.com senior vice president of applications, said the CRM company welcomes the news because it validates the market. "We've been saying all along that applications will move to on-demand, starting with CRM," Hu said. "This is defensive move by SAP. They've seen our momentum. We're penetrating some of their customers."

SAP's model will likely look similar to most SaaS applications today, "a simpler user interface sticking to the basics, quick to rollout, pay-as-you-go pricing," said Liz Herbert, analyst at Forrester Research Inc. "If I needed a solution this month, SAP's in a tight spot if they don't have an on-demand option that would take up to a few week to roll out, compared with an on-premise application that could take months, sometimes years."

An SaaS CRM product allows SAP to serve small-and-medium size businesses, as easily as larger enterprises. It would give companies that don't need a huge complex CRM system to jump in easily.

Bill McDermott, chief executive officer at SAP Americas Inc., in an interview late last year said the ultimate SaaS platform is a "business process CRM" application that is easy to use, quick to deploy, competitively priced and, if required, available as a stepping stone to SAP myCRM. "Customers are not comfortable with their precious data in the hands of a small company that has a multi-tenant data center," he said. "They lack the functionality and specific features."

A clue as to the partnerships that might be formed to watch over customer data might reside in McDermott's comment that "customers are not comfortable with their precious data in the hands of a small company that has a multi-tenant data center." McDermott said customers should have options, laying several that might include SAP, customers, or a third-party, such as IBM Corp. or Hewlett-Packard and Co., hosting the data. "SAP is more partner friendly today than in the history of the company," said AMR Research Inc. analyst Rob Bois. "They don't want to become a data center, unlike Salesforce.com which just invested millions to build customer data centers."

Bois said customization and integration are two features people commonly believe SaaS can't provide. Technologies, such as composite applications and Web services, two development models SAP is very familiar with, are changing that. And given the toolsets vendors like Salesforce.com are delivering it's becoming less of an issue.

Salesforce.com developed a hybrid model where business components are delivered as a service from a third party through API and Web services. AMR Research believes the business model will evolve even further where composite applications will also apply to specific to a company's business unit.

Application providers now publish on the Salesforce.com platform through AppExchange.com. Salesforce.com, which has 18,700 customers, has had more than 1,800 application installations through AppsExchange since it launched in early January.

Kurt Cavano, TradeCard Inc. chief executive officer and a Salesforce.com customer, said the vendor is waking up the market to SaaS. How do you turn a company like SAP, which has a traditional software model, into one dependent on an SaaS financial model, where you sell the software, implement it and get paid over time vs. sell it and get paid, he said.

One firm designing applications for AppsExchange is wireless applications provider Sendia Corp., a Salesforce.com partner that launched WorkSpace CRM earlier this month. Sendia provides an on-demand mobile platform for wirelessly enabling any application built on Salesforce.com's AppExchange platform. "We integrate through Salesforces.com's Web services API," said Lara Fay, Sendia's vice president of product management. "SAP has started a program to develop applications [for CRM] and we are in dialog with them, but haven't started development yet."

AMR Research Inc. estimates the CRM applications market at $4 billion in 2004. Hosted applications accounted for approximately $403 million.