SAP seeks to expand CRM

NEWS

Business software maker SAP, hoping to unseat Siebel Systems as the world's top seller of customer relationship management software, plans to introduce a new version of its CRM applications this fall. SAP will release mySAP CRM 4.0 in November, SAP executive board member in charge of CRM, Peter Zencke, told CNET News.com on Thursday. The new version of the software, which is designed to streamline corporate sales, marketing and customer service activities, will feature new components tailored to specific industries, such as automotive, computers and electronics, as well as consumer goods, Zencke said. Zencke also pledged to overtake archrival Siebel Systems in commanding the largest share of the $3bn CRM software market. Siebel is the CRM market leader, followed by SAP, Oracle, and PeopleSoft, according to market researcher Gartner. To that end, Bill McDermott, head of SAP's US subsidiary SAP America, said he is close to hiring a new executive to lead CRM application sales in the United States -- a critical battleground because it's Siebel's home turf. Siebel representatives were not immediately available for comment. SAP's declaration of war on Siebel is by now a familiar refrain. The Walldorf, Germany-based company has been plotting its overthrow of Siebel as CRM kingpin for years, and an SAP executive voiced the same goal last year. Although SAP has yet to outsell Siebel in the CRM market, the race is getting closer. Sales of CRM software accounted for roughly $496m of SAP's $7.8bn in revenue in 2002, compared with $396m in 2001, Zencke said. Siebel, which sells only CRM applications and services, reported $700.3m in software revenue for 2002, down from $1.07bn in 2001. In the fourth quarter the trend apparently accelerated. SAP reported growing CRM software revenue by 5 percent while Siebel reported licence revenue fell 37 percent in the quarter ended 31 December. Both companies have been hurt by the slowdown in sales of business applications over the last two years because of tight IT budgets. Many companies are not willing to launch costly new projects for CRM or enterprise resource planning (ERP) until they reduce the number of applications and better integrate systems. McDermott said he's optimistic, however, that the market will improve in the second half of the year. "I see a lot of pent-up demand for (business software) from companies that need to change and drive innovation into their businesses," said McDermott. McDermott, a former Siebel executive whom SAP hired just five months ago, is grappling with SAP's declining sales in the United States. SAP saw fourth-quarter licence sales fall 16 percent at constant currency rates in the United States, compared with a 7 percent decline companywide. SAP has given McDermott the task of turning its SAP America unit around. One of SAP's strategies for growing its CRM business is through "winbacks," Zencke said. Zencke considers any company that switches from using Siebel applications to using SAP's a "winback," and said SAP is signing an increasing number of such deals. Other software rivals, such as PeopleSoft and J.D. Edwards, also claim to be raiding Siebel's customer base. One competitor that SAP appears not too worried about is Microsoft. Microsoft released a new set of CRM applications last month for small businesses. Although SAP recently renewed its focus on selling software to small businesses, Zencke said SAP has yet to compete against Microsoft for any CRM deals. In all the fuss over CRM software market share, SAP appears to have relented somewhat in another segment of the business applications market that it once hailed as top priority. The company reported last month that fourth-quarter sales of mySAP Supply Chain Management applications declined 20 percent year-over-year. SAP's top rivals in that market, including i2 Technologies and Manugistics, have also reported declining sales. Each has touted its supply chain software as a tool that helps companies shave inventory and manufacturing costs. "Supply chain management is something that's really tough and takes time to implement, and that's why you see the decline," Zencke said.

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