The cloud space is a fascinating one. Seemingly on a daily level, players, products, and solutions evolve, creating a dynamic environment where analysts and experts alike can get caught up in the details and miss the forest for the trees.
This happened most recently in early September when SAP CFO Luka Mucic’s comments at an investors’ conference set the wheels in motion for a huge misunderstanding. Certain industry experts took his comments on strategic insights as indicating SAP was about to exit mainstream CRM, showcasing once again the propensity for hyperbole in our industry’s media coverage.
Let’s take it from the top
It may seem rudimentary, but to understand why Mucic’s comments were not an “exit from” or “concession of” the CRM market, one must first understand the concept of the CRM system.
First, there are different types of CRM: sales-related CRM solutions, service-related (post-sales) CRM solutions, and marketing-related CRM solutions. These together form what most CRMs are built to do: manage the customer relationship through interaction touchpoints.
What, then, is the “mainstream” CRM market? According to the industry commentators who believe SAP is exiting this space, mainstream CRM is purely for the SMB segment. This space is dominated by cloud-based, simple, and relatively inexpensive solutions that get an organization up and interacting with customers.
The issue, however, comes down to scale. For decades, SAP’s core strength has been enterprise-level performance across the entire solution portfolio: ERP, HCM, SRM, etc. The intentional complexity and modularity of SAP’s best-of-breed on-premises solutions naturally priced it out of the SMB space, which was intentional, as this is where SAP wins. Industry-specific functionality further cements SAP’s lead in the enterprise-class space.
So, if SAP’s strength is enterprise-level performance, and its focus is on high-growth, low-competition market spaces, is it fair to say that SAP is exiting or conceding that market? Not at all, and this rather narrow view of CRM and SAP’s strategies in the customer-experience technology market is mistaken, if not downright lazy.
The new mainstream
The largest issue with this recent commentary actually has little to do with SAP. Rather, it’s the provincial and outdated mindset defining mainstream CRM.
SAP’s aggressive acquisition strategy and robust push into cloud-based CRM isn’t some down-market maneuver to take SMB market share. Instead, it’s a bridge of sorts between the lower barriers to entry of cloud-based solutions and SAP’s pedigree of enterprise-class excellence.
Take C/4HANA, the new Customer Experience portfolio. The solution, while cloud based, has never sacrificed functionality or business-specific complexity to compete with simplistic OOTB products. Spending billions on Qualtrics and Hybris was not a gambit to take on SMB tech leaders. These capabilities were brought in to create a holistic set of customer engagement and management tools that could handle the unique challenges and business models of multi-billion-dollar, enterprise-level businesses. The point was to break away from the rigidity and simplicity of cloud solutions intended for the SMB community and instead create a customer experience ecosystem that seamlessly integrates into other key systems of record and supports enterprise-level organizations from the cloud. This is a new mainstream and a point sorely missed by recent industry commentary.
Redefining enterprise-level CRM
SAP is not conceding mainstream CRM, or if it is that is because what commentators think of as mainstream is antiquated and incapable of supporting enterprise-level business. This is SAP’s bread and butter, and the only indication we’re seeing is that SAP plans to remain in its leadership position in the space.
That’s not to say that SAP doesn’t fight in the SMB space or that it doesn’t have offerings there. By focusing its SMB plays, SAP is instead bringing in the right customers from the right markets: industries poised to scale and benefit from SAP’s enterprise-level DNA with a new lower cost of entry.
SAP isn’t exiting mainstream CRM, it is clarifying a leadership position for the future of it.
Sree Gogineni (firstname.lastname@example.org)
is Chief Technology Architect, NA SAP Customer Experience.