The Riddle of SAP

MyCustomer.com

So here's a German riddle for you. When is a user not a user? When he or she is a SAP CRM customer it seems.

Market share figures have been used as battering rams to beat up rivals for years. The database vendors have made a fine art out of throwing a hissy fit at whatever analyst firm has dared to suggest that they are not in fact ahead of the pack by a country mile.

Market share is what the current deadly love triangle in the applications space is all about. PeopleSoft, JD Edwards and Oracle are all after the same thing: control of a combined installed base that will provide a clear number two in the marketplace.

SAP of course rises above this with the comment that whoever ends up number two will still be waaaaaay behind it in terms of marketshare. But drill down to the CRM sector and we get a rather different story.

In that market sector SAP is number two to market gorilla Siebel, although SAP executive calmly predict that they can overtake within a year or so. Maybe so, maybe no, but the counter claim from the Siebel camp is that SAP is already rigging the figures by counting all MySAP customers as CRM customers even if they don't use the CRM functionality at all.

So how many customers does that involve? Well, about a third actually, not an insignificant figure in anyone's book. But then Siebel would say that, wouldn't they? Well, yes, undoubtedly, but on this occasion, no they didn't. The one third estimate comes from SAP CEO Henning Kagermann and let's face it, if he doesn't know, who does?

Customers are not going to make their buying decisions purely on the Vendor-matics statements of vendors. We all know that in the branch of maths know as vendor-matics, two and two makes - hey, whatever we in sales and marketing damn well want it to honey!!! Any set of market research figures or marketshare estimates is going to be judiciously edited and presented in such as way as to support individual vendor claims.

But it's worth bearing in mind that we're not getting an apples for apples comparison when SAP and Siebel squabble. Gartner Group analyst Michael Moaz recently updated that firm's CRM market definition to acknowledge that ERP suite vendors are able to boost their figures with statistics relating to other functional modules. His conclusion was that " a direct comparison would show that yearly deployment of users of Siebel CRM products is five to eight times larger than that of any of its key competitors: Oracle, PeopleSoft and SAP."

SAP has enjoyed a fantastic couple of weeks in the sun with the rest of the market collapsing into chaos around it. It stands as a beacon of stability and a safe haven for confused customers of the Terrible Trio squabbling at its feet. Full praise to it for that. It's a lean, efficient, enormously powerful European software success story. Just work a bit harder on the CRM Vendor-matics chaps...

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By djb554
19th Jun 2003 16:21

Let me say that I think the specific problem you are referring to is 'shelfware' which is a big problem because so many ambitious problems were stopped ater the software licenses were purchased - this affects everyone in the market.

However, there is a problem over CRM market share that is caused by the way the business suite vendors license their products. Increasingly you buy a user license that allows user to access almost any functionality in the suite. So to come up with a figure, the suite vendors (like SAP) as customers what broad functionality they are using (or what they intend to use) and base their CRM license revenues on this.

Obviously, this process is open to - what should I call it? - 'nudging' of the figures in the direction that the vendor wants to go.

Two factors lead me to think that SAP is being at least as honest as anyone else with its figures:

- firstly it publishes them with its financial earnings statements. In the in the US, it would lay itself open to class-action law-suits if it were grossly exagerating its CRM figures (in fairness the figures are not published in SAP's filings with the SAP, which means the strictures on them are a little lower but they still exist)

- for SAP to overstate its CRM revenue, that would mean it was undestating something else.

Siebel is not above playing fast an loose with the figures itself. It tends to grossly over-state its market share by producing its own far lower estimates of rival's market share. It also tends to leave the smaller players (Kana, Chordiant, Pivotal, etc) out of the market share statistics. Also, so far as I can tell (and I hope someone from Siebel will correct me if I'm wrong), it counts its PSA and ERM in its CRM license revenues.

A final factor is that Siebel tends to be far more expensive in licnse fees than most other players - not least because it doesn't use the open licensing model of the suite vendors.

David Bradshaw, Ovum

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By admin
19th Jun 2003 14:52

In its drive to grow the customer base for its analytics tools, I suspect Siebel is taking some math lessons from SAP. Recently, at a Siebel User Group meeting, they claimed that they were the second largest in Business Intelligence behind Cognos. I suspect this is a count of sales vs. seats deployed too.

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By mandrla
19th Jun 2003 15:17

It's not quite on-point, but I can't resist adding that vendor-matics is also alive and
well in the consultancy field - at least in the UK. I could (but dare not, alas) name at least half a dozen consultancies and systems integrators who decided during the last few years that they had to have the magic "CRM" in their delivery portfolio; and who now proudly claim to be CRM experts, with respectable numbers of CRM clients and projects. It turns out, of course, that much of their old work, done when they'd barely heard of CRM, has been slyly recategorised - it's "retrospective CRM". Some suitably suspicious burrowing reveals some particularly egregious examples (my favourite is where a dismally failed data extraction project for an airline was shamelessly posthumously rebadged as successful CRM). This article is yet another clue about how much hype muddies this industry. Makes you wonder how well things would work if all the energy spent deceiving
analysts and clients were spent instead on delivering the goods ...

Thanks (0)
avatar
19th Jun 2003 17:52

And 70% of CRM systems currently in use don't work. The problem is the major CRM companies think they can replace all human thought and interaction with technology. So they make robots designed by technologists that are supposed to understand humans. This is why it took me a day and a half to get through to Dell's "award winning" wireless customer service only to find they couldn't answer my question. This was after taking my customer code at probably 5 different levels and referring me to 4 other phone numbers. The real telling point will be consumer reaction and they will be returning in droves to human-faced businesses (smaller banks and investment firms, small to mid-sized CRM consultancies). The additional 20% that may cost the customer to compensate for the monopoly positions of the majors will be more than compensated for by the 100% improvement in customer service and attention. I mean seriously. The lifetime value of a mortgage customer for a bank is worth probably $100,000 - and yet that bank can't pay someone to pick up the phone on the first ring who is well-trained enough to answer their questions? I'm a dm strategy and creative expert and I've set records in a number of product categories for campaign results. How? By talking to people in a real way about things they care about in terms they can understand. That's not rocket science - that's humanity. The CRM sector needs to understand that technology is the slave not the customer and their client's employees.

Thanks (0)
avatar
By djb554
19th Jun 2003 16:21

Let me say that I think the specific problem you are referring to is 'shelfware' which is a big problem because so many ambitious problems were stopped ater the software licenses were purchased - this affects everyone in the market.

However, there is a problem over CRM market share that is caused by the way the business suite vendors license their products. Increasingly you buy a user license that allows user to access almost any functionality in the suite. So to come up with a figure, the suite vendors (like SAP) as customers what broad functionality they are using (or what they intend to use) and base their CRM license revenues on this.

Obviously, this process is open to - what should I call it? - 'nudging' of the figures in the direction that the vendor wants to go.

Two factors lead me to think that SAP is being at least as honest as anyone else with its figures:

- firstly it publishes them with its financial earnings statements. In the in the US, it would lay itself open to class-action law-suits if it were grossly exagerating its CRM figures (in fairness the figures are not published in SAP's filings with the SAP, which means the strictures on them are a little lower but they still exist)

- for SAP to overstate its CRM revenue, that would mean it was undestating something else.

Siebel is not above playing fast an loose with the figures itself. It tends to grossly over-state its market share by producing its own far lower estimates of rival's market share. It also tends to leave the smaller players (Kana, Chordiant, Pivotal, etc) out of the market share statistics. Also, so far as I can tell (and I hope someone from Siebel will correct me if I'm wrong), it counts its PSA and ERM in its CRM license revenues.

A final factor is that Siebel tends to be far more expensive in licnse fees than most other players - not least because it doesn't use the open licensing model of the suite vendors.

David Bradshaw, Ovum

Thanks (0)
avatar
By admin
19th Jun 2003 16:19

While there are numerous ways to calculate marketshare (e.g., based on revenue, customers), CRM marketshare in particular is incredibly difficult to reliably calculate for two reasons. First, vendors such as ERP providers that sell products in numerous domains (e.g., CRM, ERP, SCM) are under no obligation to break out product line numbers (and in some cases are unable to track this information or even specific application usage given their enterprise suite licensing models). Second, conflicting definitions of the technology components or modules that comprise CRM abound (e.g., some ERP vendors lump questionable CRM components such as Web storefronts and order management systems in their CRM product line numbers), which may result in marketshare inflation. End users must take CRM marketshare numbers with a grain of salt, and not use them as the sole basis for a purchase decision.

Thanks (0)
avatar
19th Jun 2003 17:52

And 70% of CRM systems currently in use don't work. The problem is the major CRM companies think they can replace all human thought and interaction with technology. So they make robots designed by technologists that are supposed to understand humans. This is why it took me a day and a half to get through to Dell's "award winning" wireless customer service only to find they couldn't answer my question. This was after taking my customer code at probably 5 different levels and referring me to 4 other phone numbers. The real telling point will be consumer reaction and they will be returning in droves to human-faced businesses (smaller banks and investment firms, small to mid-sized CRM consultancies). The additional 20% that may cost the customer to compensate for the monopoly positions of the majors will be more than compensated for by the 100% improvement in customer service and attention. I mean seriously. The lifetime value of a mortgage customer for a bank is worth probably $100,000 - and yet that bank can't pay someone to pick up the phone on the first ring who is well-trained enough to answer their questions? I'm a dm strategy and creative expert and I've set records in a number of product categories for campaign results. How? By talking to people in a real way about things they care about in terms they can understand. That's not rocket science - that's humanity. The CRM sector needs to understand that technology is the slave not the customer and their client's employees.

Thanks (0)
avatar
By mandrla
19th Jun 2003 15:17

It's not quite on-point, but I can't resist adding that vendor-matics is also alive and
well in the consultancy field - at least in the UK. I could (but dare not, alas) name at least half a dozen consultancies and systems integrators who decided during the last few years that they had to have the magic "CRM" in their delivery portfolio; and who now proudly claim to be CRM experts, with respectable numbers of CRM clients and projects. It turns out, of course, that much of their old work, done when they'd barely heard of CRM, has been slyly recategorised - it's "retrospective CRM". Some suitably suspicious burrowing reveals some particularly egregious examples (my favourite is where a dismally failed data extraction project for an airline was shamelessly posthumously rebadged as successful CRM). This article is yet another clue about how much hype muddies this industry. Makes you wonder how well things would work if all the energy spent deceiving
analysts and clients were spent instead on delivering the goods ...

Thanks (0)
avatar
By admin
19th Jun 2003 14:52

In its drive to grow the customer base for its analytics tools, I suspect Siebel is taking some math lessons from SAP. Recently, at a Siebel User Group meeting, they claimed that they were the second largest in Business Intelligence behind Cognos. I suspect this is a count of sales vs. seats deployed too.

Thanks (0)