SAP&'s Give And Take

The company bolstered channel hopes last week with a “comp neutral” sales plan for better attacking SMBs. But it also unveiled its long-awaited hosted CRM (with surprise partner IBM), which is available at this time only direct from SAP.

MySAP CRM on-demand boasts hybrid status: It can work in both on-premise and hosted modes. That will doubtless raise cries that it—unlike Salesforce.com and NetSuite—was not developed as a true software-as- a-service (SaaS).

SAP, Walldorf, Germany, says the new “isolated tenancy” model combines high availability with the lower risk of a single-tenancy architecture. Multitenancy architectures let hosts cram multiple customers on shared server infrastructure securely.

SAP is going to have a hard time making inroads into the hosted CRM market without solution providers, said Joe Giegerich, a partner with Horizon Associates Group, LLC, Marlton, N.J., which resells a hosted offering from SAP rival NetSuite.

“It really surprises me SAP wouldn&'t offer this through the channel because you need a personal relationship and you need expertise in implementing these kinds of solutions,” said Giegerich, who saw his NetSuite sales double in 2005 with a significant increase in gross margins and services. “Despite the hype, hosted CRM is not a commodity.”

Salesforce.com, NetSuite and Salesnet pioneered on-demand CRM, but recent Salesforce.com outages may have dampened public fervor for such services. Microsoft aims to be top of the heap in on-premise CRM for SMBs, but is also working on a multitenancy version better suited for hosting in the next release, code-named Titan.

SAP, which had planned to unveil hosted CRM last year then pulled back, is now offering SAP Sales for managing customers, contacts and pipelines. The new SAP offering is priced as a monthly service starting at $75 per user per month.

IBM and SAP were already longtime allies, and their allegiance seems to have tightened since Oracle bought PeopleSoft/J.D. Edwards last year. SAP announced last week that IBM will provide hosting services for SAP&'s first on-demand solution. IBM already partnered with Siebel Systems on hosted CRM, but last week Oracle completed the buyout of Siebel too, leading many to question the longevity of any Siebel-IBM hosting alliance.

For solution providers, a new model that lets them participate in sales to companies with up to $1 billion in revenue (up from $200 million) is more important than hosted CRM. SAP sales reps will be paid the same margin whether a sale goes direct or through a partner, said Donna Troy, senior vice president of global small and medium business at SAP. Such “comp neutral” models are key in curbing channel conflict.

In addition, the company&'s new PartnerEdge model makes it easier for solution partners to win partner points not only for transaction size but for training, solution development and other factors, said Ira Simon, SAP&'s vice president of global channel marketing.

Partners have to earn two types of points—for transactional activity (sales) as well as “capability building” activities such as training, e-learning, certification and referenceability—all areas “where customer SAT [satisfaction] comes into play,” Simon added.

“To get the 350 points needed to go from Associate to Silver level, you can&'t get them all from only one thing. Maybe 200 of them are transactional, but you also need training or other things. We want to ensure we have well-rounded, well-prepped partners,” he said.

Steve Niesman, CEO and president of Itelligence America, a longtime SAP reseller, consulting and hosting partner based in Chicago, is enthused. “The compensation alignment means they&'re serious about growing both their business and our business,” he said.

Niesman also lauded PartnerEdge as well-rounded. “It&'s a well-balanced program. They base your [certification level] not just on revenue targets, but you get credit for training and creating solutions,” he said.