Update: SAP launches long-awaited on-demand CRM

The $75 per user system carries a 100-user minimum, restricting its potential customers to the enterprise clients SAP traditionally targets.

SAP made its long-awaited dive into the hosted, subscription CRM (customer relationship management) "on demand" market on Thursday, launching a new software service with a starting monthly price tag of $75 per user. But SAP won't be going head-to-head with on-demand trailblazers like Salesforce.com Inc.: Its system carries a 100-user minimum, restricting its potential customers to the enterprise clients SAP traditionally targets.

SAP's service, called SAP CRM on-demand solution, focuses on sales force automation functionality. Basic customer service and marketing tools will be released later in the year. The hosted, Web-based system is aimed at allowing customers to rapidly roll out CRM functionality to new users and departments. English and German versions of the software are now available, with French, Japanese, Portuguese, Spanish and Chinese versions slated to follow within the next three months.

IBM is SAP's hosting services provider and will run the service's data centers, and will also offer its consulting services to SAP's customers. Although the two companies are close partners, SAP alone will sell the new system. SAP is guaranteeing 99.5 percent uptime, with higher SLAs (service level agreements) available to customers interested in paying for higher-tier services, according to Bob Stutz, SAP's senior vice president of CRM product and global strategy.

SAP has been eyeing the on-demand software market for years, prompted by the attention Salesforce.com and its rivals have attracted by lowering the entry barriers for buyers of CRM systems and other back-office applications. Traditional ERP (enterprise resource planning) software, SAP's lucrative strength, involves high upfront licensing costs and complex deployments. Hosted, subscription-priced, remotely managed offerings like Salesforce.com's attract customers looking for quicker and lower-risk options.

SAP's greatest strength in the crowded market will be its existing customer base. When Siebel Systems entered the on-demand market two years ago, it primarily attracted existing Siebel customers who viewed the on-demand offering as a faster way to extend their Siebel deployments to new users and units in their organizations. Stutz said that SAP, too, expects that many of its customers will come from within the SAP ecosystem.

"The reason most CRM implementations fail today is that people jump into them with both feet," Stutz said. "They don't really know what their needs are. This allows you to start and get up and running quickly. It's a good on-ramp."

SAP is a late entrant into a crowded market, and its approach is guarded. SAP executives steadfastly refused to offer forecasts or goals for how many customers they expect to attract to their on-demand offering -- a marked contrast to the tone Siebel took with its own on-demand launch. Siebel aggressively predicted it would vault to the lead among on-demand providers; instead, its user base remains a fraction of Salesforce.com's.

SAP is in the early stages of its sales push for the newly developed software, and few customers have gone live with it yet. One early user of it, DuPont Marketing and Sales IT Director Michael Michlovich, is also a very happy customer of Salesforce.com, which several of DuPont's sales teams chose years ago. "We've had good luck with Salesforce.com," Michlovich said. "We're not tearing anything out. We're going to make a move only when there's some business driver to do so."

DuPont uses SAP's ERP software, and SAP's new offering interests Michlovich because of its back-office integration potential. DuPont is currently building a link that will allow its sales representatives to access historical customer data from its enterprise SAP system through the on-demand SAP sales software. That kind of back-end integration isn't something DuPont wants to explore with Salesforce.com, Michlovich said. Sill, Salesforce.com's user interface is a big hit with DuPont's sales team, and the company expects to continue supporting a mix of sales force automation applications for the foreseeable future, he said.

American Standard Companies executive Tim Gallagher, another early SAP CRM on-demand customer, said his company was using ad-hoc tools for managing sales: "We are the masters of Excel spreadsheets."

Gallagher is the vice president of customer care for the bath and kitchen divisions of American Standard, a manufacturer in Piscataway, New Jersey. American Standard is a longtime SAP ERP customer, but installing a CRM system wasn't in the cards for the near future because of the complexity involved, Gallagher said. When SAP approached him about the new on-demand offering, he liked the idea of a quickly deployable product. Gallagher said he didn't check out other on-demand options because he prefers to remain with a trusted vendor. He expects to go live with 150 users within a few months.

"We can do this for now, and when we're ready to move forward with a full-blown CRM system, we can do that," Gallagher said. "Down the road, we want to tie it into [our business warehouse]. We see this as the first step in connecting all this together."