SAP silent over on-demand plans

A new market battle is brewing in the enterprise applications space, according to market analysis research firms. Enterprise application software providers SAP and Salesforce.com are soon expected to go head to head in an effort to convince businesses of all sizes to use their on-demand CRM software.

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By  Jane Plunkett Published  June 2, 2005

A new market battle is brewing in the enterprise applications space, according to market analysis research firms. Enterprise application software providers SAP and Salesforce.com are soon expected to go head to head in an effort to convince businesses of all sizes to use their on-demand CRM software. SAP plans to introduce its subscription-based CRM application that will be delivered over the internet in the next few weeks, according to sources close to the company. The release of the application has been somewhat delayed as SAP was originally 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 said in an interview before the conference. "There will be some announcement in this direction," he said. SAP however has since declined to comment on the upcoming CRM product, its pricing or the reasons for postponing the announcement. Industry analysis feel it is 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. However they do predict that SAP is becoming increasingly concerned as Salesforce.com gains traction among large enterprises. Especially after the CRM vendor announced last week securing a deal with prominent financial management and advisory company, Merrill Lynch, for 5,000 seats of its hosted software. Other big customers for saleforce.com include ADP, Kaiser Permanente and Nextel. SAP has two major advantages over Salesforce in enterprise space, according to Rebecca Wettemann, vice president of research for market analysis firm Nucleus Research. Firstly, SAP can tout the tight interaction of front- and back-end business processes. Secondly, many SAP customers are Salesforce customers. "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," she added. For its part, Salesforce has reportedly been questioning whether SAP can transition its business model to software-as-a-service for CRM. "They have a licensing model where they expect companies to pay up front. You can't take that revenue stream and collapse it overnight into recurring revenue," said Phill Robinson, Salesforce's senior vice president of marketing. "I don't see SAP being any more successful making that adjustment than Siebel has been."

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