June 5, 2018 / 1:00 PM / in 16 days

Caught short by Salesforce, SAP targets 'front office' market

LONDON/BERLIN, June 5 (Reuters) - SAP is unveiling its biggest product makeover in years by rolling up its sales, marketing and customer service software into a suite of tools linked to its business planning system, as it tries to catch up with faster-growing rivals like Salesforce.

SAP, the world leader in “back-office” financial control systems, on Tuesday is making its long-anticipated move to bring together all its “front office” software - combining a dozen separate customer-facing products and recent acquisitions - into a single integrated offering it will call C/4HANA.

Toward that end, Europe’s biggest software firm said it had acquired CoreSystems, a Swiss firm specialising in customer service software, on undisclosed terms. It’s the latest in a string of related deals including Callidus, Hybris, and Gigya.

So-called Customer Relationship Management (CRM) tools have surged to become the biggest category of business software, Gartner research shows. As such, CRM has become a market too big for SAP to ignore, Barclays financial analysts said.

CRM is an industry catch-all term for sales, marketing and customer service automation software - plus online commerce and analytic tools - that firms use to win and keep their customers.

Salesforce is the CRM leader with around 20 percent of the global CRM market, more than twice SAP’s share, while rival Oracle is No. 3, 2016 data from market research firm Gartner shows. They were closely followed by fast-growing competitors Adobe and Microsoft.

Gartner analyst Ed Thompson said SAP’s slow and fragmentary embrace of the CRM market meant it now had to play catch-up.

“If you measure them against the other big four, SAP is probably the weakest of the lot,” Thompson said.

At its annual Sapphire conference in Florida this week, SAP must convince users it can deliver on Chief Executive Bill McDermott’s boasts that it “has quietly been working on a master plan to disrupt CRM” and “SAP is focused on CRM big time”.

McDermott says classic sales-prospecting software is ready to be upended with a more joined-up approach that deeply connects sales and marketing functions with data from SAP’s “back office” planning tools to form a single software suite.

The new software covers not just sales and marketing functions but also commerce, customer service and consumer data protection tools, which SAP sees as a weakness in older, largely sales-focused platforms as new European data rules take effect.

“The legacy CRM systems are all about sales; SAP C/4HANA is all about the consumer,” McDermott said. “We recognise that every part of a business needs to be focused on a single view of the consumer.”

For example, CoreSystems helps manufacturing, energy, high-tech and telecom firms to “crowd source” their field service operations, allowing them to cut response times by field service technicians or contractors for new installations or maintenance calls, reducing the time customers are left waiting at home.

CRM DRIVES BUSINESS SOFTWARE MARKET

Front-office CRM software has already overtaken back-office enterprise resource planning (ERP) tools, were SAP is dominant. CRM will top database management software in 2018 to become the biggest single category of business software, Gartner predicts.

The research firm has estimated the CRM market will double in size between 2016 and 2021 to nearly $66 billion, while ERP will grow two or three times slower to around $39 billion over the same five years.

There are thousands of CRM apps, with more being released every month, making it critical that SAP’s all-in-one-suite approach still allows customers room to tap the wider system of innovation that is constantly redefining what businesses can expect CRM software to do to help them win and keep customers.

Thompson said SAP must show it will work with this constantly evolving ecosystem, the way Salesforce and rivals Microsoft, Oracle, Adobe and Pegasystems have done by creating marketplaces of apps to plug into their own platforms.

Analysts also want to see SAP spell out a more detailed technology roadmap at Sapphire to clarify how the company will bring coherence to its patchwork of existing front-office software functions.

Final product delivery times for C/4HANA have slipped from this year into 2019, which financial analysts at Barclays said was likely tied to the need for SAP to integrate its recent CRM acquisitions such as Gigya and Callidus.

The brokerage argues the full customer suite, when ready next year, could set in motion major upgrades by some of SAP’s biggest customers, which could sustain growth in coming years. (Reporting by Eric Auchard; Editing by Mark Potter)

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