Dusseldorf Efficient business processes, robust supply chains, detailed carbon footprints – Christian Klein is enthusiastic about these topics. The SAP boss has aligned the software manufacturer to its core business with business software (ERP). When the group publishes quarterly figures on Thursday evening, the manager will again report on growth figures and customer projects.
On the other hand, Klein rarely talks about another discipline: the management of customer relationships, referred to in technical jargon as Customer Relationship Management (CRM) or Customer Experience (CX). In competition with market leader Salesforce, SAP has been left behind for years.
A new strategy now envisages the software manufacturer concentrating on a niche – and optimizing the products for use in selected sectors such as the automotive industry and retail. There has been uncertainty in the scene since the announcement in January. Thomas Henzler, board member at the DSAG user association, says: “SAP has not yet clearly communicated what the new strategy means for customers in concrete terms.”
Especially since the group has changed course in the CRM business several times. “There is a lack of consistency – in terms of communication and technology,” explains Henzler, whose organization includes members from 3,800 companies in German-speaking countries. “After another change of strategy and personnel, SAP now has to deliver.”
A lot is happening behind the scenes at SAP. However, customers still need patience. The software manufacturer created the structure for the new strategy in March and combined product development for the areas of CX and industry-specific solutions. However, the implementation takes time, and the first results should not be visible for a few months at the earliest.
Trailing behind Salesforce
With customer relationship management, companies can map all phases of a customer relationship, from advertising to pricing and sales to service. In the “age of customer capitalism”, as the magazine “Harvard Business Review” calls it, this is a gigantic business: According to estimates by the market research and consulting company Gartner, sales grew by 14 percent last year to $96 billion. No software market is bigger.
A lot is happening behind the scenes of the software company.
(Photo: IMAGO/Revierfoto)
However, SAP hardly benefits from this. Last year, the German software manufacturer continued to lose ground in the CRM business. According to Gartner, sales fell by eleven percent to 2.7 billion dollars (currently 2.4 billion euros) and the market share to 2.8 percent. For comparison: Salesforce is the market leader with 19.3 percent, ahead of Oracle and Adobe. The German group itself does not present any figures for the segment.
Gartner analyst Ilona Hansen observes that SAP has hardly played a role in open tenders for CRM products for years. The group has primarily been successful in the sale of product packages in which customers buy a solution for online trading for a financial system, for example.
Hansen: “SAP focuses on the ERP business. All other product lines are subordinate to this goal.”
>> Read here: SAP presents product package for medium-sized companies
That was different a few years ago. Klein’s predecessor, Bill McDermott, trumpeted that SAP would “redefine the category” and “sell more” than market leader Salesforce. Under the leadership of the American, the group took over several companies related to customer management, including the online market researcher Qualtrics – which Klein has just sold again in the course of focusing.
SAP focuses on the ERP business. All other product lines are subordinate to this goal. Gartner analyst Ilona Hansen
Now necessity should become a virtue. “When I came, I kept asking myself: What is special about SAP? We don’t want to be Salesforce, Microsoft or Oracle,” says Ritu Bhargava, who joined from Salesforce in 2021 and leads product development for the new division. The answer: In addition to anchoring in the business with business software, this includes detailed knowledge of many industries.
Bhargava now poses as a goal to combine these strengths. “We want to develop the best CX solutions for retail, the automotive industry, utilities or the manufacturing industry” – integrated into the business processes for warehousing, logistics or finance, which numerous companies already handle with SAP systems.
From warehouse to online shop
Bhargava sees a unique selling proposition in such industry solutions. For example in retail: In an ideal world, only goods that are in stock or available within a few days are displayed in an SAP customer’s online shop – thanks to data from warehousing or logistics. This means there are no unwelcome delays in delivery.
>> Read here: SAP boss Klein cleans up the portfolio
A business process can also be consistently controlled with components from different providers, thanks to interfaces and integration software. However, Bhargava believes it is an advantage if customers use coordinated SAP products that use a uniform data model, for example.
She compares it with the iPhone: Apple’s smartphone works with all headphones – but best with the Airpods from the manufacturer itself. SAP recently announced the spice manufacturer Nedspice and the seed supplier KWS Saat as customers.
Customers still have many questions
Internally, this focus is largely undisputed. According to management circles, SAP does not have the budget to compete with Salesforce in all categories. With special solutions, for example for car manufacturers, retailers or machine builders, the group can play to its strengths. The Commerce Cloud, which companies use to organize their online shop, is the industry leader, ahead of Oracle and Salesforce.
According to insiders, SAP lacks the budget to compete with Salesforce in all categories.
(Photo: AP)
For industry observer Hansen, the strategy is based on the motto “Back to the future”. “With this CRM strategy, SAP is fulfilling a promise that the group has been making for many years: the seamless integration of products for the holistic fulfillment of a business process.” The CRM business plays a subordinate role: “Product innovations are primarily in of the ERP product line.”
There is no lack of determination at SAP. However, Bhargava’s squad’s kanban boards are full to the brim. The developers should initially still be busy for some time modernizing the programs for sales and customer service – a number of functions that were not included at the start of the new versions have to be delivered later. Work on the special solutions promised by management is running in parallel.
“The community is right to wonder if we’re serious,” says Sven Denecken, who is responsible for positioning and marketing the CX portfolio and who developed the new strategy with Ritu Bhargava.
The community is right to wonder if we mean business. SAP manager Sven Denecken
The group continues to invest in the portfolio and will show the first industry-specific functions in the four core sectors in October and name customer examples. “I attach great importance to communication – backed up with facts – in order to get the uncertainty out of the market.”
>> Read here: Like SAP, Bosch and Siemens want to network industry
The explanations are necessary, as shown by the interim results of a survey that is still ongoing among DSAG members. The mood shows that most SAP customers have heard of the new strategy but have not understood it, reports CEO Henzler.
Many are unsure whether their companies should invest in the new generation of CRM products – especially since they are just introducing earlier versions of the programs. Mind you: The survey is not representative, but the answers come from IT managers who work a lot with SAP products.
The IT manager, whose main job is Chief Information Officer (CIO) at the machine builder Piller Blowers & Compressors and himself a SAP CX customer, poses a few questions: Which functions will the new software generation have and when?
And how much effort does it take to transfer data and individual adjustments to the software from an old version to the new one? “For companies that now want to introduce new CRM systems, the decision is not easy,” says Henzler.
More: SAP invests in three leading AI startups