SAP to declare CRM war on Siebel

Business software maker SAP, hoping to unseat Siebel Systems as the world's top seller of customer relationship management (CRM) software, plans to introduce a new version of its CRM applications in the autumn.

SAP will release mySAP CRM 4.0 in November, according to Peter Zencke, the company's executive board member in charge of CRM. The new version of the software - designed to streamline corporate sales, marketing and customer service activities - will feature new components tailored to specific industries, such as automobiles, computers and electronics, and consumer goods, Zencke said on Thursday.

Zencke also pledged to overtake archrival Siebel in commanding the largest share of the $3bn CRM software market. Siebel is the market leader, followed by SAP, Oracle and PeopleSoft, according to market researcher Gartner. To that end, Bill McDermott, head of US subsidiary SAP America, said he is close to hiring a new executive to lead CRM application sales in the US - a critical battleground because it's Siebel's home turf.

Siebel representatives were not immediately available for comment.

SAP's declaration of war on Siebel is by now a familiar refrain. The Walldorf, Germany-based company has been plotting its overthrow of Siebel as CRM kingpin for years, and an SAP executive voiced the same goal last year.

Although SAP has yet to outsell Siebel in the CRM market, the race is getting closer. Sales of the CRM software accounted for roughly $496m of SAP's $7.8bn in revenue last year, compared with $396m in 2001, Zencke said. Siebel, which sells only CRM applications and services, reported $700.3m in software revenue for 2002, down from $1.07bn the year before. In the fourth quarter, the trend apparently accelerated. SAP reported 5 per cent growth in CRM software revenue, while Siebel said license revenue fell 37 per cent in the same period.

Both companies have been hurt by the slowdown in sales of business applications over the last two years because of tight IT budgets. Many companies are not willing to launch costly new projects for CRM or enterprise resource planning (ERP) until they reduce the number of applications and better integrate systems.

McDermott is optimistic, however, that the market will improve in the second half of the year. "I see a lot of pent-up demand for [business software] from companies that need to change and drive innovation into their businesses," he said.

McDermott, a former Siebel executive whom SAP hired just five months ago, is grappling with his new company's declining sales in the US. SAP saw fourth quarter license sales fall 16 per cent at constant currency rates in the US, compared with a 7 per cent decline companywide. The company has tasked McDermott with turning the SAP America unit around.

One of the software maker's strategies for growing its CRM business is through 'win-backs', Zencke said. Zencke counts in that category any company that switches from using Siebel applications to using SAP's, and said SAP is signing an increasing number of such deals. Other software rivals, such as PeopleSoft and JD Edwards, also claim to be raiding Siebel's customer base.

One competitor that SAP appears not too worried about is Microsoft, which last month released a new set of CRM applications for small businesses. Although SAP recently renewed its focus on selling software to small businesses, Zencke said the company has yet to compete against Microsoft for any CRM deals.

In all the fuss over CRM software market share, SAP appears to have relented somewhat in another segment of the business applications market that it once hailed as top priority. The company reported last month that fourth quarter sales of mySAP Supply Chain Management applications declined 20 per cent year over year. SAP's top rivals in that market, including i2 Technologies and Manugistics, have also reported declining sales. Each has touted its supply chain software as a tool that helps companies shave inventory and manufacturing costs.

"Supply chain management is something that's really tough and takes time to implement, and that's why you see the decline," Zencke said.