SAP, Siebel rivalry heats up

By Alorie Gilbert, CNET News, 23 May, 2002 11:57

NEWS

SAP will spotlight new customer relationship management products at its user conference in June as part of its effort to surpass Siebel Systems as the largest CRM company by next year, a SAP vice president said on Wednesday. The German business-applications company plans to release a new version of its CRM applications in September and redouble its sales efforts in the US market, said Carol Burch, senior vice president of SAP's global CRM business development. Burch concedes that overtaking Siebel will be tough. Siebel commands nearly 45 percent of the multibillion-dollar CRM market, according to projections from banking group ABN AMRO. SAP is a distant second, with 16 percent of the market. "We will take the market next year," said Burch. "It becomes a matter of time, but I'm sure it will happen." Also on Wednesday, Reuters reported that SAP would announce on Thursday a shake-up of its US organisation, splitting the region in two and naming an acting chief executive to replace the existing chief executive. The story cited sources close to the matter. According to the report, SAP will name the current chief executive of the Americas region, Wolfgang Kemna, as executive vice president, Global Initiatives -- a new division set up to focus on faster-growing customer and supply-chain manufacturing software products. In addition, the company will name its head of Europe, the Middle East and Africa (EMEA), Leo Apotheker, as its new head of global sales. Apotheker, a 14-year SAP veteran, will also become the acting chief executive of SAP's North American operations, the source said. Its existing vice president of Latin America, Raul Vejar, will head up SAP's Latin American division. It would be the second time SAP has reorganised its US operations in the last two years, as the German software company tries to expand its market share in the region. Kemna had been named chief executive of SAP America in April 2000, taking over from then-chief executive Kevin McKay, who held the position for just a year. The rivalry between Siebel and SAP became particularly heated after a Siebel ad campaign in Europe, SAP's home turf, claimed that Siebel is the No. 1 CRM company among SAP customers. SAP took Siebel to court over the ads, and a German court ordered Siebel to stop running them last month. The rancor between the companies erupts as overall sales of business applications, including the once high-flying CRM market, are in decline. At the same time, the market is growing more crowded with Microsoft planning to release a CRM product by the end of the year. Goldman Sachs cut its earnings forecast on Wednesday for Siebel, SAP and 24 other software companies and predicted corporate spending on business applications would remain stagnant this year. Shares of both SAP and Siebel fell on the news. SAP, with over $6bn in revenue last year, introduced its first set of CRM products only two years ago and has been playing catch-up to Siebel ever since. SAP's revenue from its CRM products last year totaled $412m, compared to Siebel's $2.05bn in revenue last year. "Siebel is a formidable competitor and they've owned the market," said Burch. "Certainly they have competition now." SAP's licence revenue from CRM products grew 8 percent year over year in the first quarter of this year. Siebel reported that its first-quarter licence revenue declined 27 percent. Even so, analysts said it's unlikely SAP will get out ahead of Siebel anytime soon. "SAP will continue to do very well, gain market share and will have a much higher growth rate, but they are currently one-fourth of Siebel revenue," said Joanie Rufo, an analyst at AMR Research. To bolster its efforts, SAP is now working to expand the number of CRM sales experts on staff in the United States from 45 to all 275 US sales executives, said Burch. The United States is the key to SAP's growth in the CRM market, said Burch. Her goal is to grow CRM sales as a percentage of overall licence revenue to 20 percent this year, up from 17 percent last year. She expects 60 percent of new CRM licence revenues to come from US accounts this year.

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