SAP to Blend ERP, On-Demand CRM

Although the company may be late to the game, customers are willing to make room for its new software-as-a-service offering.

NEW YORK—Michael Michlovich, marketing and sales IT Director at DuPont, has no plans to migrate off of his customer relationship management subscription. Hell use it right alongside the newer implementation of SAPs on-demand CRM applications, he said.

"Well roll out SAP as business conditions present themselves," Michlovich said. "There are a number of sales [people] that want to do process work. They need greater flexibility and more sales data."

A longtime SAP shop, Duponts historical sales data is stored in SAPs ERP (enterprise resource planning) system. has the first mover advantage for Michlovich: "Salesforce got a head start on SAP," he said. "Theyve now committed a lot of resources to customers like us. We respect that a lot."

SAPs goal is to one-up the current on-demand model by providing customers with access to back-end data through "out of the box" integration scenarios that link its on-premises ERP applications to its Sales On-Demand, available now, its Marketing On-Demand, available next quarter, and its Service On-Demand, available in the next six months.

Finally staking a claim in the software-as-a-service market, SAP announced on Feb. 2 its "hybrid" CRM on-demand solution software at dual events in New York and Palo Alto.

The solution is aimed to appeal to the companys massive installed base of customers in the enterprise and upper-midmarket, with an "isolated tenancy" software model that, like a multi-tenancy model, pushes quarterly upgrades to customers en masse.

What distinguishes the isolated tenancy model is that a template of each customers CRM installation is maintained on a separate database. What this avoids is across-the-board outages that can occur with multi-tenancy models where all customers are on the same server, SAP officials said; what it promotes is an easy upgrade to SAPs on-premises software.

"We will not push customers [from] on-demand to on-premises," said Shai Agassi, SAP executive board member in charge of application development. "We dont see this as a trick or ploy to bring them in."

According to Agassi, customers will migrate from on-demand to on-premises when theyre ready to customize.

"[Users] can continue to configure in an isolated environment as long as they want, but when they want to start coding very differently, with processes that are unique, or complex processes across the enterprise, they can take an image of their [on demand CRM] system and bring it in-house," Agassi said at the Feb. 2 event. "They can also split between divisions and departments—some on demand, some on premise, which is hybrid."

/zimages/6/28571.gifClick here to read more about SAPs new on-demand CRM.

DuPonts Michlovich said whether the model is multi- or isolated tenancy doesnt matter. "Im really not interested in that," he said. "What were interested in is user experience."

SAPs on-demand CRM software uses the same code as its MySAP CRM suite. Michlovich said that where the two instances differ is in usability. "The on-demand application is cleaned up a lot. Its easier to see and navigate. Its more elegant. Theyve done a nice job."

You Say You Want a Revolution

Despite its success in the on-premises world, SAP is facing stiff competition from established on-demand providers. Pure-play companies like, NetSuite and RightNow Technologies have built strong businesses based solely on service-based applications. (, whose mantra is essentially "the death of software," has been viewed as the gold standard in on-demand software, until several recent outages put customers in a dither.)

At the same time, SAP archrival Oracle acquired Siebel Systems on Jan. 31, along with two CRM code lines—on premises and on demand. While its anybodys guess how long it will take Oracle to integrate Siebel effectively into its next-generation Fusion Applications plans—Oracle has said it will standardize on Siebels code—one thing is for certain: With a huge development staff and R&D budget, Oracle will likely be a formidable competitor.

Where SAP has the advantage for a current customer is with integration to its on-premises ERP software—and an upgrade path to MySAP CRM. Using SAPs NetWeaver integration platform based on SOA (service-oriented architecture) concepts, some of the on-demand processes are linked into SAP applications. Users have the ability to add more links.

"One of the [misconceptions] in the on-demand world is all you have to do is turn it on to make it work. The reality is that a lot of the challenges traditional CRM vendors face, those problems dont necessarily go away because its on demand," said Eric Berridge, CEO of on-demand integration consultancy Bluewolf Group, based in New York.

" has APIs that support Web services, interfaces on SOAP [Simple Object Access Protocol] and XML. However, the devil is in the details. If you truly want to integrate your order management system into Salesforce, there are a lot of decisions to be made."

Berridge said that for the most part with enterprise clients, they wind up writing their own code to integrate on-demand and on-premises systems.

That said, few enterprise companies—Siebel is a prime example—have had success in offering a subset of their enterprise software for on-demand purposes. There is a fundamental difference between developing software for on premises and for on demand, according to Ken Rudin, the former general manager of Siebel CRM OnDemand.

/zimages/6/28571.gifRead more here about SAPs long-term strategy.

"If you dont really focus from day one on building on demand, and just try and take older software and host it, its lipstick on a pig. You can fake it for a while," said Rudin, now the founder and CEO of LucidEra, of San Mateo, Calif., an on-demand analytics provider still in stealth mode. "SOA doesnt necessarily imply multi-tenancy. You have to think about it. And SOA doesnt imply on demand."

And as CEO Marc Benioff pointed out in an e-mail—ostensibly to employees but distributed widely to the media—SAP has garnered relatively little success with its on-premises CRM software.

"While SAP claims leadership in CRM, experience suggests a different story," Benioff said. "If SAPs CRM software is any good, then why dont they 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." Benioff listed some of SAPs bigger customers—DuPont, DeutschePost, AirProducts, Autodesk, EFI, DeutscheBank, Analog Devices—as CRM users.

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