SAP muscles into the CRM arena

SAP debuted its hosted customer relationship management (CRM) software service on Thursday, moving the business software applications giant into an arena that is becoming increasingly crowded.

SAP unveiled its hosted CRM service and trotted out several industry titans, such as IBM, as its new on-demand partners.

The software applications giant is looking to capture a slice of the ever-growing hosted CRM market, which includes pioneer Salesforce.com, archrival Oracle - which is getting a boost to its hosted CRM efforts via its Siebel Systems acquisition - and Microsoft, which in November announced its first subscription-based CRM offering.

With the debut of its SAP CRM on-demand solution hosted service, SAP said it wants to be a hybrid model aimed at large and medium-sized businesses.

The new service, priced at $75 per user per month, will offer such features as tools designed to be easily configured to manage sales, customers and contacts, and will offer synchronisation to integrate desktop productivity applications.

Shai Agassi, president of SAP's product and technology group, said: "We started our planning by asking our customers what they needed. They needed continuous deployment options and a more strategic CRM... They wanted more than just a sliver of customer information. They wanted a full picture of the customer."

The company is banking on two features which it hopes will differentiate it from competitors. One is technology designed to allow multiple users of a company to share the same master copy of the software, yet allow each to use it on their own independent system. The goal is to prevent all users from suffering a "brown out" during peak use, said Bob Stutz, SAP senior vice president of CRM products and strategy.

SAP also touted its hybrid model, which is designed to allow users to migrate from an on-demand CRM model to one in which they own and manage SAP software internally. The software giant aims to allow customers to take any customisations they have made to their SAP CRM on-demand system and transport it to locally managed systems. The on-demand offering is also designed to integrate tightly with SAP's back-office software.

Rob Bois, an analyst with AMR Research, said: "They are going after existing SAP customers. We've talked to customers and while it is a nice checkbox option to have, it's not the primary criteria they use when selecting an on-demand solution."

He added that while customers who migrate to SAP's CRM licensed software from its on-demand offering will not face the hurdle of cumbersome data transformation issues, they would, nonetheless, still have to install the complex server-based software.

SAP's Agassi said customers may opt to migrate to its licensed CRM software should they desire very complex and distinct sales processes.

With its announcement on Thursday, SAP introduced the sales module of its on-demand CRM offering - the first of three phases that will be launched in the next six months. This phase is designed to offer customers the ability to manage their sales contacts, for example.

A second phase will be SAP Marketing on-demand, which is slated to launch in the next quarter. That will include such features as lead management and pipeline management. The third phase, SAP Service on-demand, will debut in the third quarter and handle such areas as call centre management.

AMR Research's Bois noted that while most customers want the CRM sales component with contact management first, he noted few on-demand Siebel and Salesforce.com customers would be likely to switch to SAP until it has all three modules completed.

SAP's initial offering lacks some of the more advanced features that competitors already have, he added: "SAP still has a lot of catching up to do but it's a good first step."

SAP has more than 30,000 customers and Bois estimated that 10 per cent have purchased the companies licensed mySAP CRM software.

Overall, the hosted customer management software industry grew to $600m in revenues last year, according to analyst estimates, and is expected to grow 29 per cent over the next five years, Bois said.

SAP is also partnering with IBM, which will not only help sell the SAP CRM on-demand offering but will also provide the hardware and hosting infrastructure for the service. The companies declined to disclose their revenue-sharing arrangement.

Dawn Kawamoto writes for CNET News.com