Despite the SMAC (social, mobile, analytics, cloud) trends being in plain sight for the past half decade, and SaaS Customer Relationship Management (CRM) apps being available for well over a decade, the business value proposition of SaaS CRM apps has only just recently made progress.  First generation SaaS CRM apps enabled small and medium businesses to more easily invest in CRM.  First generation SaaS CRM also offered larger organizations an option to circumvent IT’s at times lethargic response rate.  Nonetheless, the features available from early SaaS CRM apps were no richer than that of the older on-premise generation, and the vendors of the early SaaS CRM apps have first had to wrestle with the technical side of SMAC before plugging SMAC into a better business value proposition.

SAP, however, means to change all of that.  Call it CRM 3.0 if we must affix some kind of label suggesting a major versus minor change, but the change is so palpable that at SAP Insider’s “CRM 2014” conference held recently in Las Vegas, SAP referred to its cloud CRM solution set as “Customer Engagement Solutions,” a more accurate and meaningful moniker.  SAP’s promise to its customers is that they will be able to “Engage customers like never before.”  That is quite a promise for Nayaki Nayyar, SVP, who heads-up SAP’s Cloud for Customer and integration efforts, and her team to deliver on, but there is plenty of evidence to back up the validity of SAP’s bold promise.

R&D Based on Customer Engagement

One way SAP meets its promise results from how SAP engages with customers for its Cloud based CRM R&D.  SAP has moved to a combination of cloud era plus agile customer-driven development for its cloud CRM solutions.  SAP updates its cloud CRM code base quarterly, and during the intervening period works directly with customers to foster an outside-in, co-innovation R&D atmosphere.  Using agile sprints with customer involvement, SAP’s updates reflect customers’ needs and interests versus the imagined requirements of isolated developers.  In terms of reliability of the quarterly updates, Ms. Nayyar said that SAP’s design goal was for it to be a “non-event to upgrade.”

An important note to existing on-premise SAP CRM customers:  This same quarterly update cycle also now applies to on-premises SAP CRM.

Industry and Customer-Size Sensitivity

SAP historically differentiated itself from other enterprise application providers by infusing industry-specific capabilities into its horizontal feature sets.  SAP also understands as well as any other vendor, due to direct experience, that the largest of multi-nationals deal with a unique set of challenges such as pan-time zone operations and country-specific compliance.

To that end, SAP’s Nick Brown, SVP, is leading the engagement with large customers across many industries, with several of the industries already in the co-innovation phase, and several industry solutions live in the cloud.  Architecturally, SAP does not treat industry-specific objects as add-ons, but rather deploys those objects into the solution core.  Customers simply turn on the objects they want, which means SAP customers may evolve at their own pace.  It also means that SAP customers that participate in hybrid industries (e.g. retail warehouses) or multiple industries will have their needs met.

Rub of the Green breaks against SAP’s competition in SMAC and UX

SAP has benefitted from the rub of the green (aka “better to be lucky than good”) going against the first generation SaaS CRM vendors in terms of SMAC and user experience (UX).  By being a second mover in terms of SaaS CRM, SAP has architected and designed its customer engagement solutions for SMAC and with a rich, flexible HTML5 UX, which it calls Fiori, from the outset.  The mobile-first design, infused with social, and combined with a modern HTML5 UX, puts SAP a full generation ahead of the SaaS CRM first movers who have had to bolt on SMAC and continue to use the older Web-style menu user experience.  Users simply like to use the Fiori UX apps better than the circa Web 1999 user interface.

The SAP Revolution is not Just About CRM

If it seems that SAP’s cloud CRM offerings seem disconnected somehow from the more old-world SAP because of CRM’s modern UX, agile R&D, and object-based flexibility, you have the wrong impression.  Bernd Leukert, head of Application Innovation and a member of the Global Managing Board of SAP AG, kicked off CRM2014 with a keynote that initially seemed like an advertisement for SAP HANA in general, and SAP Business Suite on HANA in particular.  If you waited long enough, however, it became evident that the SAP Business Suite on HANA is at the center of a major re-architecture of SAP’s solutions.

Referring to the change as a “fundamental renovation of the Business Suite,” and calling it “a new product with the old branding,” Mr. Leukert dove into the details of the re-architecture.  With HTML5 Fiori now the standard UX for SAP apps including on-premises apps (he stated that 238 apps already use Fiori), the Fiori front-end taps into core business object “app services” through gateway services.  Mr. Leukert said that there are already 7000 gateway implementations.  The goal of the cloud service style re-architecture is “application simplification” which starts with a modern UX operating around business process management, task management, and the “people that do the job.”  It also enables customers to recombine and adopt application objects to most optimally fit their pace and needs.

Simply interpreted, SAP now has an architecture that eliminates the notion of silo apps or modules.  There is some “secret sauce” in there I don’t completely understand yet, where apparently the HANA database houses and executes at least a portion of the “apps services” layer.  In the client server, 3 tier architecture days, I would care more about the “secret sauce,” and might object to the notion of using a database as an object container.  In the cloud era, however, who cares as long as the recombined apps perform, are reliable, and provide business benefit.

Will SAP Suffer from the Rub of the Green in terms of Market Timing?

Just as SAP catches a break by being a second mover in terms of SMAC and modern UX, does it conversely suffer in terms of addressing a market that has at least partially been saturated?  After all, Salesforce.com and SugarCRM have been moving up towards the enterprise, Sage has rejuvenated its Cloud CRM offerings, and on the small business side there are appealing suppliers like Zoho.  Isn’t SAP too late for the SMB CRM market, and playing defense with its own customer base?

The take here is that at least from an architectural and product perspective, SAP has successfully played leapfrog over the original SaaS CRM providers, and SAP has not expressed any intention of challenging for wins in the small business arena.  Only a minority of SAP’s on-premise CRM customers, and Oracle’s on-premise CRM customers for that matter, who have not already jumped to other SaaS CRM providers are likely to just throw the switch and dump SAP or Oracle at this point.  Thus, in terms of helping its existing customers better engage with their own customers, SAP remains in the driver’s seat.  And with some creative marketing and selling, SAP could tap into new business as well.

The one caveat is, perhaps ironically, SAP CRM lacks its own dedicated sales force; the SAP direct sales team continues to offer the immense SAP SKU list to customers where the CRM solutions represent just a small part of the SAP salesperson’s action.  On the other hand, the indirect channel, systems integrators and SAP-dedicated consultancies in particular, seem to show more interest in SAP CRM because they are typically in the position to help customers with “what’s new.”

In addition, therefore, to the normal “sales plays” the SAP rep has at her or his disposal, the SAP CRM team may want to come up with variety of business-benefit driven paths to Cloud CRM.  Oracle has already done something like this, defining about two dozen paths for customer cloud adoption.  Now that SAP has made it easy and beneficial to use its cloud CRM apps, it needs to ensure that its own sales process make it exceedingly easy for its reps and customers to see the near-term ROI and benefits.

EMA Perspective

SAP has suggested that customers using older-style CRM, both on-premises and first generation SaaS CRM, are using a “19th century funnel” approach for customer engagement, and that through SAP Customer Engagement Solutions customers will upgrade themselves to a “21st century funnel.”  While perhaps that concept provides interesting air cover, SAP needs to harp on the fundamental benefits:

  • The new Fiori UX will ensure that more users actually use CRM, and will use more of CRM.
  • The native inclusion of social and mobile will make a wide swath of users more productive and effective in their jobs; on the social side the key benefit is truly better understanding of and engagement with customers.
  • The re-architecture means that customers may switch to cloud CRM more at their own pace, and may grow in terms of customer engagement sophistication over time.
  • The analytics embedded in SAP Customer Engagement solutions, while advanced in nature, present themselves so naturally that customer intelligence will undoubtedly improve.

If we are talking about a fundamental shift, to CRM 3.0 for want of a better term, SAP needs to continually underscore the many advantages that nearly all CRM users would love to have, and to focus on fixing the specific pain points that nearly all CRM customers suffer by being on the old school on-premises and first generation SaaS CRM applications.  Nobody is going to jump into a new CRM solution because “we get to use HANA.”  They will consider that new solution, however, if they are convinced of material and rapid ROI in terms of customer-facing employee effectiveness, happier and more loyal customers, better customer margins, and more customers – all compelling yet fundamental business outcome improvements.