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SAP acknowledges barrier to mySAP CRM implementations

With its recent release of SAP Sales On-demand, SAP hopes to counter slow CRM adoption rates within its own customer base by giving customers a faster way to get up and running.

Editor's note: This article first appeared on on February 13, 2006 and has been updated.

Large-scale CRM implementations have historically been cumbersome, expensive projects. It's something SAP is both acknowledging and addressing with its recent release of SAP Sales On-demand. The new offering could counter slow CRM adoption rates within its own customer base -- comprised mainly of upper midmarket and large enterprise -- in part by giving customers a faster way to get up and running.

SAP claims to have 3,000 customers using CRM, but we believe only about a third of those are in full deployment.
Robert Bois,
research directorAMR Research Inc.

While the German software giant points to strong license revenue as a signal of its leadership in the CRM market, analysts have suggested many of its CRM licenses are sitting unused. Many of those customers are turning to Software as a Service (SaaS) competitors like, lured by subscription-based pay models and rapid deployment..

"The success of the first stages of the CRM journey are most critical," said Pat Bakey, senior vice president for North American CRM at SAP America Inc. "We learned that when you get started with a CRM implementation there are different requirements and those requirements weren't capably met by our enterprise offering."

For many SAP customers, CRM adoption was scheduled in the second and third phases of an ERP project and by that time, customers were either worn out or not willing to undergo system disruptions to fully implement mySAP CRM, Bakey said.

"Clearly CRM is seen as one of the strongest business strategies around, but the problem is that the big bang didn't work," he said.

More information:

The hidden costs of SAP on-demand

SAP launches on-demand CRM

SAP's entry muddles the hosted market

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For nearly a full year, SAP had been hinting that it would launch a software-as-a-service (SaaS) product and the speculation was that it would be software that would compete with hosted CRM specialist But SAP had a bigger problem to address. Many of its customers were holding mySAP CRM licenses but few of them were progressing to full implementations, said Robert Bois, research director at AMR Research Inc.

"From a revenue standpoint it still looks like SAP CRM is doing fantastic," Bois said. "SAP claims to have 3,000 customers using CRM, but we believe only about a third of those are in full deployment."

Some SAP customers wanted to get mySAP CRM up and running quickly but "there wasn't anything that fit quickly that enabled them to do that," said Adam J. Klaber, who oversees CRM consulting in IBM's Business Consulting Services division. SAP customers were starting piecemeal e-commerce projects and other specific features around CRM, he said.

"[Customers] knew if they wanted to solve complex problems, they could come to SAP CRM," Klaber said. "However, those that said 'I know [SAP CRM] has true value, but I don't need it yet -- I just need to get started' could not come to SAP at that time. They had to look to others for either the quick deployment or the subscription-based model. Because a lot of the barriers to getting started is financial and we couldn't serve those customers."

SAP wants to siphon off the customers that are lured to hosted CRM competitors because of intuitive interfaces and easy set ups, said Joshua Greenbaum, principal consultant at Berkeley, Calif.-based Enterprise Applications Consulting. Many of SAP's largest customers are taking a hybrid approach to CRM, allowing small divisions to choose their own CRM provider, Greenbaum said.

"Many customers don't want to have to go through a painful migration of their key customer environment," he said. "If they are SAP on-demand customers today, they can then move to the on premise part without a painful migration."

Hosting for large businesses

While SAP won't turn away new customers, many small and midsize businesses might not find SAP's on demand CRM software attractive. SAP's single tenancy model, which hosts each customer at an IBM data center on a unique server and database is viable for only the largest customers, according to analysts. It is different from and Oracle-Siebel on demand CRM software, which is based on a multi-tenancy model. and Siebel are aiming at small and the lower end of the midmarket by grouping customers on a shared server and database.

"From an architectural standpoint and cost standpoint SAP's model prohibits them from going to the small and midsize market," Bois said.

Still, SAP has not yet disclosed how much space each customer will get with its single tenancy model. Bakey said customers should trust that an ample amount of space would be provided. Meanwhile, SAP said it would sell additional storage space at 25 GB increments. Bois said customers will likely balk at buying additional space.

"The expectation that charging customers for additional space is going against the grain of the whole on-demand model," he said. "When charging per user and per month, one of the advantages is that the black box should meet their needs and there shouldn't be a concern about the number of processors and servers or disk space."

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