SAP's On-Demand CRM Valentine

SAP announced this week that it will launch a hosted-CRM application in February, which the company hopes will allow it to compete further with Salesforce.com. CEO Henning Kagermann made the announcement during SAP's 2005 fiscal earnings briefing on Wednesday morning. Bill Wohl, spokesman for SAP, confirmed the news today. "Our view is that existing on-demand products are very niche, and do not really meet customers' CRM requirements," Wohl says. "There has been a move away from best-of-breed CRM software vendors towards companies like SAP that offer companies suites integrating CRM with other enterprise applications." In addition to this first on-demand CRM product, the company also plans this year to launch a series of apps aimed at smaller businesses operating in the midmarket. SAP also wants to further penetrate the midmarket within existing accounts by targeting business users through initiatives like project Mendocino, which integrates SAP applications with Microsoft Office. SAP to remain on the growth track it established in 2005, estimating 15 to 17 percent growth. "New product launches will support our Enterprise Services Architecture Roadmap, and [will be] focused more than ever on the midmarket," Kagermann said during the briefing. Industry pundits think SAP's entry into the on-demand space is long overdue, but Bill Band, consulting analyst, enterprise applications for Forrester, says the market shouldn't be so quick to discount the German giant. "You have to give SAP credit. They were late to the on-premise CRM party and they have managed to successfully improve their product offering and have a value proposition around end-to-end process integration that the market has accepted," he says. "Even though they're late to the on-demand party, you have to take them very seriously." Band says it's vital that SAP offers an on-demand solution that's compelling to customers. "I think it's a good move for SAP and it's clear there is demand for on-demand CRM. The jury is out whether the SAP offering will be competitive and differentiating enough to what is already out there, that's the question mark." The company also reported strong financial results for 2005, with software revenues rising by 18 percent to $3.39 billion. The company had anticipated those revenues to increase by 12 to 14 percent. This marks the eighth consecutive quarter of double-digit growth in software revenue for the vendor. SAP stated that its CRM sales in North America grew by nearly 50 percent in 2005, as compared to an overall growth rate of 22 percent for SAP's CRM products worldwide. Band says this is a clear sign of the European company's continuing incursion into the U.S. market. "They've made their commitment to the North American market. A lot of their senior management has moved to Silicon Valley and their competitors have had a lot of distractions. SAP has had the luxury to stay focused and implement their strategy consistently." Related articles: SAP Will Acquire Khimetrics The Competitive Threat Oracle Has a Q2 Earnings Drop