May 26, 2005 (10:05 AM EDT)
SAP Readies On-Demand CRM

Read the Original Article at InformationWeek

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A new market battle is brewing in the enterprise applications space. The soon-to-be combatants: SAP and Salesforce.com, both of which aim to convince businesses of all sizes to use their on-demand CRM software.

In the next four to five weeks, SAP plans to introduce a subscription-based CRM application that will be delivered over the Internet, according to sources close to the company. SAP originally was expected to unveil the application at its Sapphire '05 customer conference in Boston earlier this month.

"The question about on-demand CRM came up at the analysts call for our quarter one, and we referred them to Boston and said we would say something around on-demand then, and not before," SAP CEO Henning Kagermann told CRN in an interview before the conference. "There will be some announcement in this direction," he said.

SAP declined to comment on the upcoming CRM product, its pricing or the reasons for postponing the announcement. At this time, it's too early to tell if SAP will be able to grab the dominant share in yet another application market, as it has with nearly every other software realm it has entered. Yet the answer could have a lasting impact on the channel, given that Salesforce.com remains firmly committed to a direct-sales model--even as SAP continues to ramp up its indirect efforts.

Many industry observers say SAP is becoming increasingly concerned as Salesforce.com gains traction among large enterprises. Last week, for example, the San Francisco-based CRM vendor revealed that Merrill Lynch has signed on for 5,000 seats of its hosted software. Other big customers include ADP, Kaiser Permanente and Nextel.

All signs indicate that SAP views its first on-demand application as a product for all sizes of companies, which means the hosted software would need to address a variety of issues. SAP has two major advantages over Salesforce in enterprise space. First, SAP can tout the tight interaction of front- and back-end business processes. Second, many SAP customers are Salesforce customers, said Rebecca Wettemann, vice president of research for market analysis firm Nucleus Research.

"It would make sense for SAP to have a competitive platform to Salesforce," Wettemann said. "The question is how SAP executes, because there's a lot more to on-demand than just workflow. There are also things like analytics and built-in sales coaching. If you are that late to the party, you have to be wearing a really cute dress."