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SAP enters SaaS market

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Yesterday, the German enterprise software vendor SAP announced it is entering the hosted software-as-a-service (SaaS) market with the expansion of its mySAP CRM offering to include a hosted option.

The first service SAP will offer as a subscription is its sales-on-demand solution, with pricing from $75/user a month, and with hosting services from IBM.

In a Business Week article yesterday discussing SAP’s move, market researcher IDC estimates that, while on-demand sales made up only about 6 percent of the roughly $9 billion CRM market last year, that percentage could rise to as much as 25 percent in five years. A commentary by Line56 also yesterday says SAP’s announcement illustrates a convergence of interests and models as the 1990s best-of-breed concept fades further into the distance.

DestinationCRM.com’s report on the CRM market leaders in 2005 says a recent AMR Research report indicated that 47 percent of large enterprises, or companies with more than $1 billion in revenue, were going to look at the hosted model as part of their “going forward CRM strategy.” If there is a single one-to-watch on-demand provider, destinationCRM says, it’s Salesforce.com.

One to watch right now clearly is SAP. The obvious new-customer target for SAP would be Saleforce.com (whose CRM SaaS pricing starts at $65/user a month). That’s not quite how Business Week sees it, though:

[...] While SAP’s battle with Salesforce.com is lively, its most ferocious competition is with Oracle, the No. 2 corporate applications company. With the completion of its $5.58 billion takeover of Siebel Systems on Feb. 1, Oracle overtook SAP to become the leading traditional CRM software supplier.

Oracle already has both traditional and on-demand CRM products, as does Siebel. Now, with the combination, it expects to make headway against SAP in both spheres. That’s partly because the uncertainty about Siebel’s future has been resolved and customers are feeling more comfortable about buying its software again. Juergen Rottler, executive vice-president of Oracle On Demand, says Oracle will be much more aggressive about pushing on-demand services than SAP. “We believe that on-demand is the future of our business,” he says.

Ones to watch.

Neville Hobson is the author of the popular NevilleHobson.com blog which focuses on business communication and technology.

Neville is currentlly the VP of New Marketing at Crayon. Visit Neville Hobson’s blog: NevilleHobson.com.

SAP enters SaaS market
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