Will SAP Bring the Steak or Just the Sizzle to SAPPHIRE?

More than once in SAP’s Q1 earnings announcement, Bill McDermott said, “We want CRM.”  He made it clear that surpassing the current CRM leader, Salesforce, is a serious goal for SAP and stated that a truly comprehensive portfolio of solutions to transform the front office and “connect the end-to-end value chain” will be launched at SAPPHIRE. But despite McDermott’s confidence and the excitement of SAPPHIRE, CMOs and CCOs should keep a few things in mind during SAP’s presentation of its new CRM capabilities.

All of the Major Components of SAP’s CRM Platform are Acquired Entities

Rather than developing a CRM platform, SAP has acquired and consolidated various companies and solutions into the SAP Cloud Business Group, under the SAP Hybris Solutions banner. There are three core products included:

SAP Hybris:  Acquired in 2013, Hybris is the core ecommerce platform allowing businesses to develop omni-channel capability to sell online, mobile, in-store, and even via a contact center.  Hybris contains necessary functionality to manage content as well as allow customers to manage orders.  As part of the Intelligent Business, Hybris Marketing Cloud and Hybris Customer Attribution leverage machine learning to improve and deliver individualized customer engagement and to help businesses identify which marketing strategies are driving engagements.

Gigya:  Acquired in November of 2017, Gigya brings three primary solutions:

       1. Customer Identity– Enables businesses to identify and engage customers via any channel as well as centrally manage profile data, preference, and consent settings compliant with privacy requirements.

      2. Customer Consent– Empowers a customer’s control over interactions with a business and provides demonstrated proof that explicit customer consent has been granted consistent with privacy regulations anywhere customers are served.

      3. Customer Profile– Allows businesses to use various data attributes to establish a single customer profile which can be leveraged across all applications and services.

CallidusCloud:  Acquired in April of this year, SAP plans on leveraging CallidusCloud’s capabilities to provide sales associates with an instant view of compensation associated with product and pricing configurations as well as the ability to identify and configure products with built-in discount rules.  Sales associates can also generate proposals and contracts for customers in real time.

These acquisitions fill a gap in SAP’s CRM portfolio and allow SAP to compete directly with Salesforce and Oracle. Armed with this new product suite, Bill McDermott seems to focus his messaging on the fact that SAP has ERP and a common data model that can scale (HANA) which means it can support the whole value chain in a way Salesforce has not been able to.

There are Some Potential Challenges Associated with the “New” SAP CRM Platform

Whether you are considering an investment in SAP CRM or are an existing customer of Hybris, CallidusCloud, or Gigya, we recommend contemplating the following:

Performance:  As with any newly acquired entities, integrating these solutions will take time.  If you are looking to supplement your current CRM product set or invest in the platform, it will be important to ensure your agreement terms clearly state how functionality will be delivered and that there are no accountability gaps between products. For example, be sure the SLA’s are consistent, support your business requirements, and include sufficient incentives (penalties) for performance. Given the importance of customer-facing systems, your business can’t afford negative impacts to customer interactions.

Compliance:  Customer information is the currency of most businesses and the regulatory environment surrounding customer data is only getting more complex and dynamic. Hope is not a strategy for managing and securing customer data. Since SAP indicated that they are ready for GDPR and is using security as a selling point, your agreement terms should hold SAP accountable for maintaining standards and standing in front of any claims which fail to meet current or future customer data regulations.

Transparency:  It also is important to obtain a high degree of transparency regarding the commercial terms which govern each product.  How modules are priced, the cost of additional use or capacity, and how use of one module impacts the costs of other applications will be crucial to understanding whether the TCO supports your business case. Ensuring these commercial terms are clear and documented as part of your agreement will assist your business in making informed decisions and holding SAP accountable.

Predictability:  As with all SAP acquisitions, SAP’s desire is to move customers off the legacy company’s contracts and onto SAP general terms and conditions.  Existing customers should leverage future opportunities to maintain favorable business terms in new agreements (e.g., unlimited use/deployment rights).

Likewise, new customers should be sure they understand how any proposed commercial terms will apply over time.  If SAP’s approach to Ariba and Concur is any indicator of future behavior, it’s a fair bet that SAP will create new commercial constructs with these acquired products which, over time, increase future revenue streams and limit the duration customers can leverage previously negotiated favorable business terms. Downstream price protections and future discounts on current and additional products will be key terms to lock into your agreements.

Indirect Access:  One final matter to factor in as your business considers its future CRM direction is Indirect Use. Those companies not planning to use SAP’s front-end platforms but plan on using an existing SAP digital platform for fulfillment should expect SAP to position Indirect Access as a way to extract revenue for those who choose to keep their existing third-party systems (e.g., Salesforce) or chose another competing platform. This issue and its consequences are only recently becoming understood and may materially impact the risk and cost of CRM decisions going forward.

SAP has repeated that it “wants CRM” and they want to take market share that they believe is rightfully theirs. During SAPPHIRE, there’s no doubt SAP will present a solution that looks like it can go head-to-head with Salesforce and Oracle (the Sizzle). However, whether SAP can demonstrate a true end-to-end CRM platform, which not only delivers business capability but is commercially viable to new and existing customers both now and over time (the Steak), will be of more importance.

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