SAP continues toying with on-demand CRM

IDG News Service - SAP AG will move into the on-demand customer relationship management market sometime next year, but getting the product right has proved tricky, according to Shai Agassi, the head of SAP's products and technology group.

SAP has been participating in test projects and working with customers for some time to craft its strategy for the enterprise resource planning software, which will likely be offered with both hosted and on-premise options, Agassi said in a discussion with the press at SAP's annual gathering of industry analysts, which took place in Las Vegas. However, the company plans to take its time perfecting its offering, and when the software is ready, it intends to launch the product quietly.

"We won't do the kind of announcement Siebel has done," Agassi said, referring to Siebel Systems Inc.'s dramatic cannonball into the hosted CRM market in late 2003. Siebel's then-CEO, Tom Siebel, predicted Siebel would dominate the on-demand market within a year. Instead, the company continues to trail early pioneer Salesforce.com Inc., which has 350,000 subscribers. Siebel has 44,000.

With Salesforce.com's success demonstrating customer demand for enterprise software sold as a hosted, managed service, top-tier ERP vendors like Oracle Corp. and SAP have been under pressure to come up with similar offerings, which are particularly attractive to small companies looking to minimize their IT challenges. Oracle will become the owner of Siebel's CRM OnDemand service once its Siebel acquisition closes, and Microsoft Corp. said this week it has begun offering a monthly subscription licensing option for partners that would like to offer its Microsoft Dynamics CRM software as a hosted, managed service (see ""Microsoft ships long-delayed CRM update").

SAP was rumored to be planning an on-demand software announcement at its Sapphire user show earlier this year, but the event came and went with no news. Executives later confirmed that SAP was developing a new hosted product for a 2005 release. Agassi said Tuesday that next year is a more likely launch target.

"We will come out with a product when we come up with a product that meets the needs of small businesses," Agassi said. "We have plans that will be clarified when we are ready to clarify them."

SAP already has a product aimed at midmarket businesses: Business One, a suite it acquired in 2002. With licensing prices starting at $3,750 per user, Business One is probably too expensive for the smallest businesses. SAP sees a market for an even simpler sales, service and marketing offering that would be designed for customers with little or no