Salesforce, SAP Battle for On-Demand Supremacy

By Renee Boucher Ferguson  |  Posted 2007-09-20 Print this article Print

SAP and are rolling out new applications and platforms, but deny direct comparisons.

There are obvious comparisons between and SAP. is selling on-demand CRM (customer relationship management) software and a development platform that enables customers and partners to develop add-on applications, including ERP (enterprise resource planning) software that integrates with Salesforces development platform. SAP will also sell, as early as 2008, an integrated suite of ERP and CRM software that also amounts to a development platform that customers and partners can utilize to build add-on composite applications. These similarities could not have been more apparent the week of Sept. 17. At the same time unveiled the name of its development platform,, at its Dreamforce user conference in San Francisco, SAP launched its on-demand suite Business ByDesign—formerly code-named A1S—at a one-day event in New York.
Company officials at SAP and Salesforce vehemently deny any direct comparisons.
"It is comparing a little hors doeuvre, an appetizer, and a complete three-star meal," SAP Deputy CEO Leo Apotheker said in an interview with eWEEK. "Salesforce has a CRM application. It happens to be that the vast majority of businesses on this planet do a little more than just CRM. Our attempt is to get rid of all these acronyms. Businesses dont really buy acronyms, they buy a processes flow, a business model. We provide a complete solution and we provide a complete suite, lock stock and barrel, which is Business [ByDesign]. You dont need CRM from Salesforce any more. Its superfluous. No wonder [ CEO] Marc [Benioff] is worried. It is disconcerting. He has every right to be concerned." In an interview earlier in the week, Benioff referred to SAP as an "innovation-free" company. "People who havent followed our company closely often ask, Arent you worried? A company with the resources of SAP can bring so much to this battle. But thats 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." However, declarations of independence aside, there are commonalities between the two companies offerings. During Dreamforce, officials announced the final piece of the platform, Visualforce, which lets developers build any user interface to any application. The San Francisco-based company also announced two new applications, Content and Ideas, that add to its CRM portfolio but appeal to a broad user base that could span departments. Content provides a raft of Web 2.0 technologies—such as tagging, subscriptions, recommendations—that help users manage unstructured data. Ideas is a service that enables companies to build communities where participants can post and vote on ideas. By contrast, SAP, based in Walldorf, Germany, has taken the fully integrated ERP route when it comes to on-demand. SAPs newly launched—though not yet available—Business ByDesign offering provides suites for common back-office functions like finance, human resources, CRM, supply chain management, supplier relationship management and corporate governance. The suite provides the all-important integration with Microsofts Office environment, and provides newer Enterprise 2.0 technologies like on-demand community interaction and live help links from within the Business ByDesign suite. While has become synonymous with on-demand CRM, the addition of a development platform—and Apex development language—is a clear indication that the company is looking to move beyond its CRM roots. In addition to, Salesforce has branched out in other ways, including through its AppExchange on-demand marketplace, where customers and partners can post and eventually sell the third-party applications they have built using Salesforce.coms tools. The company will also launch around the end of 2007 its AppStore, which will monetize application transactions for partners by providing back-end services, such as one-stop billing, and marketing services. Both companies are taking the channel approach to reaching the midmarket, though is also looking for inroads into enterprise markets, while SAP will arguably leave that market to its on-premises software until it has some kinks ironed out with Business ByDesign. Both companies also face hurdles in making on-demand sales profitable for their partners. SAP has the added challenge of building a channel market nearly from scratch. While SAPs Apotheker said the company has about 2,500 midmarket channel partners who already sell its on-premises software, moving those people from a perpetual-license revenue model to a subscription-based model is no small task, and one faced by other vendors looking to embrace the on-demand model. Salesforce, by contrast, has a small but fervently dedicated partner channel. The problem is, the company hasnt found a way to actually make a lot of money building and selling third-party applications. The upside for both and SAP is that they have large customer bases to tap for cross-sell opportunities. Salesforce has 35,000 customers and 900,000 subscribers; SAP about 32,000 customers globally. During a question-and-answer session at Dreamforce, Benioff admitted that has a tough time educating customers about on-demand technology and what the company has to offer. "When we rolled this out for the first time, customers did not get this," he said. "User interface as a platform—I am the first who ever used this term. The same with platform as a service. … The reality is, even though I get it, I do not take it for granted that anyone else gets it. Its a tough row. Its tough out there." Asked whether he faces similar challenges to SAP in educating customers about the companys Business ByDesign suite, Apotheker took the middle road. "Yes and no. I dont think you should view the market as one big holistic monolithic block," he said. "Our customers will understand this very well. … We have a complete portfolio. On the on-demand side we have Business ByDesign; [for those who] dont like on-demand, we have SAP Business One and SAP All-in-One or our full ERP. … We do not need to necessarily evangelize on-demand. It is just one of our products, one of our offerings. So yes, it will require a lot of education, but maybe [those companies] shouldnt be running on-demand, maybe they should be running an [on-premises] solution. Wed be happy to supply that." Check out eWEEK.coms for the latest news, reviews and analysis about productivity and business solutions.

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