SAP targets Salesforce on CRM: What's aspiration vs. reality?

"We want CRM," says SAP CEO Bill McDermott. SAP's chief has some valid points and perhaps CRM needs reinvention. The question is whether SAP has the next-gen CRM approach or is it a robotics process automation player.

SAP CEO Bill McDermott is aligning his company behind a next-gen CRM platform that will take direct aim at Salesforce. Details about this effort are scarce--at least until SAP Sapphire in June, but McDermott's "we want CRM" mantra raises an interesting question: How vulnerable is Salesforce?

McDermott, speaking on SAP's first quarter earnings conference call, couldn't stop talking about CRM. Analysts played along and asked a bevy of CRM questions. In broad strokes, McDermott indicated the following:

  • CRM needs to be reinvented in a way that ties back end processes to the front end.
  • The cloud enables a company like SAP to be more line of business and front office.
  • SAP's acquisitions of Gigya and Callidus give it a big CRM opportunity.
  • Customers are becoming concerned about Salesforce's pricing and wallet share.

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That's the short version. McDermott's long-form comments, which are being dissected on a few enterprise software fronts, go like this for your parsing pleasure.

The technology industry to date has not delivered the capabilities to reinvent the front office. In fact, for many businesses today, so-called cloud CRM is nothing more than overpriced software running on first generation SAS architecture. This is just probably why so many have responded so eagerly to SAP's recent statement about a new vision for CRM. They know change is coming, we're coming. Unlike others, SAP's approach actually begins with the end consumer.

Look at the headlines around data and social media. Consumers are nervous out there. In the age of GDPR, how can businesses give consumers choice about their own data? If permission is given, how can businesses protect the data, engage the consumer however they choose to be engaged, deliver them what they want and keep them happy and loyal at the same time? With SAP's acquisition of Gigya and CallidusCloud now complete, at SAPPHIRE, we will introduce a truly comprehensive portfolio of solutions to transform the front office. Our objective is simple: help legacy CRM go the way of legacy database. No other company has the capacity to do it, we do. That's why companies like Unilever, Jaguar, Land Rover and Coca-Cola selected SAP front office solutions in Q1. There was a time when a market leader was dominating at CRM. It was said that they couldn't be disrupted. Well, let's be clear once again, we want CRM, we want CRM.

OK, that CRM plan sounds ambitious if a touch vague in spots, but the McDermott elaborated a bit.

As it relates to CRM, what we're seeing here is the customer really needs the entire value chain connected. How do I design a process? How do I build around that single view of the consumer to drive economic value, customer satisfaction and loyalty? And how do I deliver, I mean, really deliver the right product at the right price at any location where that customer is, taking into account that customer is on the move? Very often they're actually connected from an IoT perspective in social media, in new and highly innovative ways. And big companies are having lot of trouble putting that all together, and clearly, legacy CRM platforms aren't going to get there. And that's why you're seeing them develop a strategy around even more M&A, even when the multiples make no sense whatsoever because they don't have the ERP, and now they have to come up with some methodology to connect all this complexity, which is where we come in. This is what we're really, really good at. So you'll see us connect the entire value chain from the consumer all the way through to the supply chain in seamless integrated processes, by industry and in the cloud. We also put deep machine learning AI, IoT and blockchain into the application to make it easier for the customer to consume this innovation out-of-the-box. You'll see a branding campaign, you'll see a major launch at SAPPHIRE in my day 1 keynote.

McDermott was clearly talking about Saleforce's acquisition of MuleSoft. And when it comes to ERP, he has a point about Salesforce--at least until it acquires FinancialForce or perhaps even Workday. Rootstock acquires Kenandy as ERP on Salesforce platform consolidates | FinancialForce plots expansion, updates ERP suite, eyes services automation

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But in the end, SAP's CRM play may be about price. McDermott noted:

One of the customer meetings I've had with a CEO and his leadership team recently went something like this: our price has been raised. We've been nickeled and dimed on every little application imaginable, and I'm paying 65% more now for my CRM assets than I was 18 months ago, and I'm not seeing the value. So this is not an uncommon situation.

I think some of it will be upgrading SAP's own base, some of it will be net new because it's a whole new idea when you think about the intelligent enterprise and the end-to-end. And clearly, some of it will be replacement, where customers now will have an alternative that will be marketed properly, invested in properly. and the customers will say, given the choice.

Again, McDermott makes some points. The add-on pricing list for Salesforce is fairly extensive.

So what does this all mean? Here's my take:

SAP needs to keep its base and up sell those enterprises to CRM. Right now, SAP has been often relegated to plumbing with a Salesforce front end. There's a reason Oracle has been able to chirp about HCM and CRM wins almost every quarter--it can bundle with ERP. SAP's McDermott has said the suite always wins , but has neglected the front end.

Salesforce could more vulnerable than we think. Lightning is a nice design language, but it's not hard to find workers who grip about the Salesforce UI. Meanwhile, enterprises need another option for negotiating power. There may also be add-on fatigue for Salesforce customers.

Oracle is making headway in the front office and is connecting multiple cloud efforts. What if Oracle uses the front-end to leverage more ERP wins from SAP?

The SAP vs. Salesforce CRM war is a nice storyline, but may miss the point. Robotics process automation and AI meets CRM is the real storyline. And on that note it's worth mentioning a Wedbush research report highlighting how Pegasystems is landing large enterprises (with Oracle and Microsoft also in the mix) for CRM. Pegasystems and Salesforce are increasingly bumping heads in the enterprise, but there's plenty of white space for both to grow, said Wedbush analyst Steve Koenig.

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Now let's think this through. Pegasystems comes at CRM from a business process automation perspective. Add in robotics process automation, a field that'll give enterprises more productivity, and you have a unique spin. Koenig said:

Among focused vendors with meaningful robotics offerings, Pegasystems now has differentiated technology for desktop automation (relevant for front-office use cases) and is a leading player in unattended automation, per our integrator checks. Competitors in the space are Automation Anywhere and UK-based Blue Prism, niche vendors that lack Pegasystems footprint in large enterprises or its breadth of CRM and BPM offerings.

In the end, SAP is going to be more Pegasystems than Salesforce. It's likely that McDermott's vision for CRM rhymes with the Pegasystems approach. SAP clearly has the enterprise footprint and the process automation knowhow. A purchase of Pegasystems or Blue Prism could be interesting. Pegasystems aims to give sales people personalized coaching via AI |

Bottom line: SAP's McDermott clearly wants CRM and may have a few openings. It now has to deliver once it fills out this CRM vision a bit more beyond talking points.

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