| By SAP News Desk |
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| February 2, 2006 08:30 AM EST |
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'Europe's most influential technology company is helping us make on-demand the global standard,' wrote Marc Benioff (pictured) in a memo yesterday to all his employees at SalesForce.com. He was referring to SAP, the German software giant, which is finally expected to announce an on-demand CRM product this week, after what Benioff called 'months of warming up.'
"Is SAP on the defensive?" Benioff's memo continued. "Are they worried that with few customers actually using their CRM software, and salesforce.com making significant inroads in their customer base, their entire business model may be at risk?"
He was far from optimistic, on SAP's behalf:
"For starters, they had better hope that their on-demand offering will win more fans than their on-premise solution has."
But that was just his opening salvo. Soon he warmed to this theme:
"While SAP claims leadership in CRM, experience suggests a different story. I have often wondered, 'If SAP's CRM software is any good, then why doesn't SAP use it to manage their own customer relationships?' I have interviewed hundreds of salespeople and executives from SAP from around the world, and each has told me the only CRM system at SAP is an executive system based on Microsoft Excel. I'm not surprised since I have never met a salesperson anywhere in the world who uses SAP CRM. Indeed, Gartner noted at a recent conference that only 19 percent of SAP CRM customers actually use it. If fewer than a fifth of our customers used our service, we'd consider that a failure. At SAP, they call it a business plan. Even SAP's largest customers such as Dupont, DeutschePost, AirProducts, Autodesk, EFI, DeutscheBank, Analog Devices, and so many others use Salesforce for CRM."
"People who haven't followed our company closely," he continued, "closely often ask, 'Aren't you worried? A company with the resources of SAP can bring so much to this battle.' But that's exactly the problem. Observers tend to overestimate the creativity and innovation that entrenched technology companies can bring to a particular problem and underestimate the effect of business model conflicts that lurk behind the scenes."
He then lambasted SAP in the strongest possible terms:
"Let's state it simply: SAP is an innovation-free company. When reporters describe the great innovators of this industry, it's easy to identify the significant contributions of many of the leaders. For Oracle, it's the database; for Apple, the Mac, iPod, and iTunes; for Microsoft, the PC operating system; for Intel, the microprocessor. But for SAP? I struggle to think of a single innovation that SAP has contributed. Their code is as bulky and inefficient as it is expensive and unloved by its users."
"And that is just part of the problem. Mustering the will to turn your back on the business model that has enriched you, your employees, and your shareholders has time and again proved far more difficult than solving technological hurdles. SAP, like Oracle and Microsoft, now risks cannibalizing its existing customer base. Can they actually afford to convert their billions of dollars in maintenance revenue into subscriptions? This classic innovator's dilemma engenders painful internal rifts and wastes valuable time while customers' needs languish."
Benioff ended his memo with a hint that SAP might so founder that it would become Oracle's next acquisition prey:
"Siebel tried to sell an admittedly inferior on-demand product as an on-ramp to its on-premise system. It appears that on-ramps make road pizza out of your business model. That strategy sent an entire company slouching towards Redwood Shores this week. Will SAP make the same mistake?"
"Of course, in the end, I agree with Henning Kagerman that SAP's customers should explore the benefits of on-demand," Benioff concluded. "In fact, I invite all of them to sign up for a free 30-day trial. When rivals who have long dismissed our model finally embrace on-demand, minds and markets are opened to us. Let's respond the salesforce.com way and make each one of these customers a success."
They don't make CEOs like Marc Benioff any more.
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