SAP vs Salesforce.com

Posted by: Steve Hamm on February 02, 2006

SAP is expected to soon announce its entry into the software-as-service fray with a CRM offering. Click to the next page to see what Marc Benioff, CEO of Salesforce.com, had to say to his employees in advance of SAP’s announcement. (somebody sent me the internal memo)

From: Marc Benioff
Sent: Wednesday, February 01, 2006 4:43 PM
To: All Salesforce.com
Subject: SAP on the defense?

Fellow employees,

First Siebel, then Oracle, then Microsoft. After months of warming up, SAP is finally expected to announce an on-demand CRM product this week. Europe's most influential technology company is helping us make on-demand the global standard.

Is SAP on the defensive? Are they worried that with few customers actually using their CRM software, and salesforce.com making significant inroads in their customer base, their entire business model may be at risk?

For starters, they had better hope that their on-demand offering will win more fans than their on-premise solution has.

While SAP claims leadership in CRM, experience suggests a different story. I have often wondered, “If SAP’s CRM software is any good, then why doesn’t SAP use it to manage their own customer relationships?” I have interviewed hundreds of salespeople and executives from SAP from around the world, and each has told me the only CRM system at SAP is an executive system based on Microsoft Excel. I’m not surprised since I have never met a salesperson anywhere in the world who uses SAP CRM. Indeed, Gartner noted at a recent conference that only 19 percent of SAP CRM customers actually use it. If fewer than a fifth of our customers used our service, we’d consider that a failure. At SAP, they call it a business plan. Even SAP’s largest customers such as Dupont, DeutschePost, AirProducts, Autodesk, EFI, DeutscheBank, Analog Devices, and so many others use Salesforce for CRM.

People who haven't followed our company closely often ask, "Aren't you worried? A company with the resources of SAP can bring so much to this battle."

But that's exactly the problem. Observers tend to overestimate the creativity and innovation that entrenched technology companies can bring to a particular problem and underestimate the effect of business model conflicts that lurk behind the scenes.

Let's state it simply: SAP is an innovation-free company. When reporters describe the great innovators of this industry, it's easy to identify the significant contributions of many of the leaders. For Oracle, it's the database; for Apple, the Mac, iPod, and iTunes; for Microsoft, the PC operating system; for Intel, the microprocessor. But for SAP? I struggle to think of a single innovation that SAP has contributed. Their code is as bulky and inefficient as it is expensive and unloved by its users.

And that is just part of the problem. Mustering the will to turn your back on the business model that has enriched you, your employees, and your shareholders has time and again proved far more difficult than solving technological hurdles. SAP, like Oracle and Microsoft, now risks cannibalizing its existing customer base. Can they actually afford to convert their billions of dollars in maintenance revenue into subscriptions? This classic innovator's dilemma engenders painful internal rifts and wastes valuable time while customers' needs languish.

Siebel tried to sell an admittedly inferior on-demand product as an on-ramp to its on-premise system. It appears that on-ramps make road pizza out of your business model. That strategy sent an entire company slouching towards Redwood Shores this week. Will SAP make the same mistake?

Of course, in the end, I agree with Henning Kagerman that SAP's customers should explore the benefits of on-demand. In fact, I invite all of them to sign up for a free 30-day trial. When rivals who have long dismissed our model finally embrace on-demand, minds and markets are opened to us. Let's respond the salesforce.com way and make each one of these customers a success.

Aloha,

Marc


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Reader Comments

peter

March 4, 2006 09:14 AM

I am keen to find out about the Microsoft CRM product and how it stacks up against the likes of Salesforce.com both in a hosted and onsite environment. There is no doubt that that Microsoft will make inroads into this market due to the native interface the CRM application will have with the rest of the Microsoft Desktop applications and from an end user perspective, the look and feel, ease of use and user adaptation will be a strong selling point in users quickly embracing such a product.

Jim

February 2, 2007 08:14 AM

The best part: "[SAP] code is as bulky and inefficient as it is expensive and unloved by its users."

SAP is a nightmare squared, software outdated at least by two decades. Those who use it, curse it from day one. Users are constantly bruised by anti-intuitive user interface, "objects", "ids" and the remaining "fun" stuff that considerably slows down any productive work.

But, hey, SAP will never create a usable product because this is how they make money: from support and consulting fees.

Larry E.

March 27, 2008 05:23 PM

It's easy to bash the market leader, much like how pundits from Apple bash Microsoft. Ever wonder why there's no lawsuit from Microsoft against Apple's smear ads? It's because Apple has a tiny fraction of Microsoft's OS market share and is no threat.

Likewise it's easy to bash SAP. With its largest customer base it's easy to find the occasional customer who is dis-satisfied.

And of course Salesforce.com will be easier to use than larger, more capable solutions from SAP.

You can also say Quickbooks is far easier to use than SAP, but does that mean Quickbooks is a superior solution to manage a company's finances and operations?

SAP software is large, and sometimes complex, but they are able to leverage to tremendous functionality and features to the smaller market. They need to make the software more intuitive and easier to install / understand, but with their major initiatives and investment in the small to mid-market, the market will benefit.

junper

May 22, 2008 10:49 PM

WOW what a late comment! SAP is a robust environment with very few limits. Using SAP is sort of like command line for linux. It's a dirty and complex process, but the control and tweaking that can occur is limitless. Other options might be easier to use out of the box, but the customization is not there. Perhaps the arguement can stop once a user friendly interface is created.

Ash

October 1, 2009 10:50 AM

Users befriend technology that works for them, even as dull and non-intuitive as SAP. And the advantage of having 40 years of operative exp has served SAP well and indeed many of its customers. CRM is NOT SAP's bread and butter unlike Salesforce. The arguement that SAP CRM onDemand is doomed to fail is a little disingenuous, given that success to SAP would mean increased customer adoption even in single digit percentages...

To me, Marc understands this and is really the one on the defensive.. My two pence...

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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