Since the announcement of SAP's initial CRM 1.0 product offering a few years ago, interest in SAP CRM amongst global customers has steadily risen. However, even as SAP's CRM product capabilities have grown, some SAP customers have chosen not to wait on SAP, and have elected to implement best-of-breed offerings from CRM software makers such as Siebel, Clarify, and Kana instead. But despite these defections, the clear consensus of SAP customers on CRM has been "wait and see." Are they waiting on SAP? Perhaps. Or are they just waiting in general? The lack of investment in SAP CRM can be attributed to a number of factors, including a perception that the organization is not ready for mySAP, the IT spending cutback and current economic conditions, SAP's perceived lack of CRM market credibility, and a decreasing level of market confidence in the return on investment (ROI) of CRM solutions. Whatever the reason, the reality is that a large segment of the SAP customer market has not elected to pursue SAP CRM. At least not yet.

In order to gain a better understanding of why SAP CRM has gained only modest market acceptance, and to learn what the real capabilities of the latest 3.0 product are, I am pleased to bring you the first of a two part discussion with SAP CRM expert Scott Cameron. Scott is a former Big Five Consultant with PwC who has spent the last three years managing the sale and implementation of the SAP CRM application, up through the current 3.0 version. In addition, Scott offers a deep track record in R/3 SD, MM and Workflow configuration, and he is an expert on SD Pricing and Variant Configuration processes.

Brian Trout: Scott, before we talk about the CRM 3.0 application, I would like to get your perspective on the current status of the market. We all know the down economy is a factor in the current soft market for application software, but do you see any specific reasons why demand for CRM applications has curbed so dramatically?

 Scott Cameron: Brian, I don't know if the demand has curbed, or if companies have just placed their CRM initiatives on hold. I think that most companies are looking to implement some facet of a CRM strategy in the future. I think the delay for CRM initiatives can be traced back to two main factors: one, as you stated, is the economy; and the second is the lack of tangible ROIs for CRM initiatives. With today's economy, we have seen companies pare back project budgets. Companies have become more internally focused to ensure viability. As a result, projects such as CRM solutions are less of a priority. For CRM projects to become a priority for a company, project sponsors must have a viable business case with tangible ROIs.

Trout: Determining ROIs for CRM is a difficult process. How do you tangibly measure customer service, customer retention, sales force integration and customer goodwill, to name a few? Most companies agree that these factors are very important, but how do you put a value on it?

Cameron: Well, most CRM business cases assess benefits against costs, using conventional investment appraisal techniques. However, this approach can be problematic when justifying expenditure in new technology that is unproven in a given industry. In this case, there may be little data available on benefits or base costs. There are two main approaches to tackling this: first, the benefit case may be less of a simple financial case, and could be based around intangibles such as the drive for competitive edge. Approval of such a case will be critically dependent on an organization's attitude to risk and their business goals. The second approach would be to evaluate how much the revenue line needs to increase in order to cover costs at a reasonable ROI, and to assess how realistic this is. Either approach can be a difficult and a time consuming process, one that takes effort at numerous levels of management.

Most companies in today's marketplace have shifted their resources from initiatives such as CRM to other aspects of their business to ensure survival in these tough economic times. The lower priority placed on CRM, coupled with the level of effort needed to determine tangible ROIs, makes it much easier for companies to delay CRM initiatives and refocus CRM dollars on other aspects of the business.

Trout: Several industry insiders I have spoken with seem to agree that many customers lack the vision necessary to effectively select and implement a CRM solution. How does an organization develop a vision for CRM and how is it important in determining the potential ROI?

Cameron: In order for a company to effectively evaluate their ROI, they need to have a clear CRM vision and a plan to achieve that vision. It's like building a house. You need a plan, a strong foundation and tasteful finishings. First you need the vision. Like a house, you need an understanding of what you would like to build. Do you want a bungalow or a two-story home? In order to obtain an understanding of your CRM needs, one must understand: what is CRM? CRM is not a software package, a call center or an Internet site. CRM is a business strategy that focuses on creating and improving relationships between customers and the enterprise, in order to maximize the lifetime value of that customer.

In order to document your vision, you need to answer the following question: What do I need to accomplish in order to maximize the value of my customer base? Is it to increase market share? Is it to better serve my customers, providing quicker order-to-delivery turn around? Is it to improve customer contact? Is it to reduce our customer care costs? Like a plan to a house, the vision is the big picture. This step will also provide you a main ROI for your CRM vision. For example, if the company's goal is to increase market share from 14% to 17%, the company should be able to extrapolate the specific dollar amounts associated with the 3% gain. These are the first ROI numbers.

Continuing with the vision, the company must determine ways to maximize customer value. There are two ways to achieve this. First, to increase revenues, and secondly to reduce internal costs. The foundation of any business is the order/service-to-cash processes. Therefore, the foundation for the CRM vision is the order/service-to-cash processes, coupled with the ERP and/or legacy systems. This is important because a sound customer order/service fulfillment process is visible to the end customer. Normally, the human factor in a company is able to conceal company inefficiencies. With CRM, a company's fulfillment business processes will become directly exposed to the customer and the customer will witness any process inefficiencies. If a business process appears inefficient, it may cause your customers to lose faith in order processing and/or servicing capabilities, which may result in losing the customer to a competitor. An efficient internal order/service-to-cash process will decrease your fulfillment costs as well as provide the foundation for customer retention. As a result, efficient internal processes will yield ROIs. Unfortunately, most companies overlook their internal processes as a possible CRM benefit.

Trout: I see. So potential CRM customers should pay more attention to how the CRM system can streamline internal processes. What other areas should customers focus on?

Cameron: Now that we have an understanding of the CRM foundation, we need to determine how we are going to create and improve the external customer relationships. At this stage, a company needs to evaluate how their customers interact with them today, how they would like their customers to interact with them in the future, and what information they would provide to the customer. Referring to the house analogy, this is our tasteful finishings; this is what people see as the finished product in their new home. These are your customer contact points which define how customers are going to interact with the company. Unfortunately, when most companies are evaluating CRM ROIs, they focus only on this particular aspect.

For a successful CRM strategy, a company must think BIG but execute small. The visioning stage will provide a company with the big picture, and then successful execution of the CRM strategy should be completed in small and manageable phases.

Since the announcement of SAP's initial CRM 1.0 product offering a few years ago, interest in SAP CRM amongst global customers has steadily risen. In order to gain a better understanding of where SAP-CRM stands today, in terms of functionality and scalability, I am pleased to bring you the conclusion of a two part discussion with SAP CRM expert Scott Cameron. Scott is a former Big Five Consultant with PwC who has spent the last three years managing the sale and implementation of the SAP CRM application, up through the current 3.0 version. In addition, Scott offers a deep track record in R/3 SD, MM and Workflow configuration, and he is an expert on SD Pricing and Variant Configuration processes.

In the first part of our discussion, we covered some of the overall issues facing the CRM market. In this installment, we take a closer look at the latest release of SAP CRM, and ask Scott to give us his perspective on how this solution will fare with both existing and potential SAP customers.

Brian Trout: Scott, shifting the discussion specifically toward SAP CRM, What significant enhancements has SAP included in CRM 3.0?

Scott Cameron: Brian, the main feature of the CRM 3.0 release is the integration across the mySAP.com suite of products and the integration into back-office legacy systems. With this integration into back office systems, SAP no longer has to rely on SAP CRM customers to have an SAP ERP system.

If you have an SAP ERP system with the functionality of the Sales and Distribution module implemented, you will find some duplication in functionality. This duplication in functionality occurs in the sales order and invoicing areas. One great feature of SAP is its scalability. If you have implemented the SD module, you do not have to re-implement the sales order or invoicing functionality within the CRM platform. For a successful implementation of any CRM strategy, a company needs to think big and execute small. A scalable platform will allow the implementation team to leverage previous work, which should reduce the implementation cycle to subsequent phase.

With 3.0, SAP has improved its messaging interfaces for B2B processes. Customers can be integrated using either XML-standards or EDI. Import interfaces for product catalogs, customer data, and sales orders have been expanded. As well, export interfaces for sales order confirmations and invoices are now available. These features give a company greater flexibility and functionality when implementing CRM for the electronic media medium.

In addition, there are a host of other enhancements specific to channel management, multi-channel analytics and deployment, but they are too numerous to mention within this forum.

Trout: I see. We have observed a similar trend moving away from R/3 reliance in other areas of SAP's latest applications such as BW 3.x, WAS 6.2 and Portals 5.x. What impact has this trend had with respect to CRM?

Cameron: Now for the reality: this non-reliance on the SAP back end has come at a price. With the early releases of the CRM 3.0 platform, the data integration with the back-end is not as strong as 2.0. For example, the sales office and sales group within the customer master fields was not developed in the 3.0 platform. Some companies have used these fields for territory management and sales analytics within the R/3 system. These fields were developed and released in the 2.0 version of the software, but were not available in the earlier version of the 3.0 software. Companies who migrated or implemented CRM 3.0 have had some challenges if they used these fields as a part of their business processes. Companies either had to rework their business processes to overcome this gap in functionality, or they had to custom develop these fields to get the functionality they desired. The sales office and sales group fields are now available with support pack 10.

I would recommend that any company starting a new implementation or starting a new phase of their CRM implementation upgrade to service pack 10 as a minimum. This will ensure that most of the undocumented features of the 3.0 release should be addressed. Like R/3, CRM is an evolving software platform. More functionality and improved integration will continue to be released as new versions become available.

Trout: Is SAP CRM as a stand alone truly able to compete with Siebel for non-SAP CRM customers? And if not, where is SAP still coming up short to Siebel?

Cameron: Yes, I think SAP can compete with Siebel for non-SAP customers.  SAP has developed strong interfaces within the R/3 platform and SAP has been able to leverage this functionality within the SAP CRM platform. It is this functionality that gives SAP an advantage over Siebel in terms of ERP integration. Another difference between SAP and Siebel is that Siebel has pre-delivered industry solutions. This is a feature that Siebel emphasizes when selling their CRM platform. 

Trout: Does SAP seem to have any intentions of marketing SAP CRM to non-SAP clients, or are they primarily focused on winning CRM accounts on their own install base?

Cameron: In my opinion, SAP will market SAP CRM towards non-SAP customers, but the sales cycle for new product, such as SAP CRM, to an existing customer base is short, and thus less costly than marketing towards non-SAP Customers.

I think SAP should continue to market SAP CRM towards their own customers first, for a couple of reasons. First, SAP customers understand the benefits of using SAP, such as data integration, vendor support, software platform release strategies, etc. Second, SAP customers are comfortable with the software platform look and feel, software design logic and their issue resolution channel. All of theses points can be summarized as the customer/vendor relationship.

The sales cost in developing new vendor/customer relationship in a new market niche is expensive. Thus, each sale of the product to the existing client base should yield higher profit margins to the vendor as well as easier market acceptance. This is why SAP should continue to market the SAP CRM platform to their existing customer base first.

Trout: In your opinion, has SAP CRM evolved enough to fulfill a company's CRM vision?

Cameron: The answer is YES. I believe that SAP has the technical and functional foundation to fulfill a company's CRM strategy. The CRM platform is scalable and robust enough to provide a company with the functional building blocks to meet their CRM requirements. As well, the mySAP.com platform is integrated, similar to the R/3 ERP platform - it provides the same customer data information in real time across many customer touch points.

One feature about the mySAP.com platform, which I like as a consultant, is that it will support any Internet, data or CRM strategy. Most companies have a centralized or decentralized data strategy, and/or an inside-out or an outside-in Internet business strategy. SAP CRM will support any business strategy. This is a real cost savings advantage because it reduces the change management factor needed to provide a working platform to support a company's CRM vision. From what I've seen with the other CRM platforms, they usually favor one type of business strategy over another. If the strategy they support does not reflect your company's business strategy, additional development and change management will be required to successfully implement your CRM vision.

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This concludes our two part discussion with Scott Cameron. As we suspected, SAP has closed the gap considerably on its major CRM rival Siebel, and offers many of the capabilities that were once a competitive advantage for smaller CRM application providers such as Onyx and Kana.

We conclude with some final thoughts for any companies currently staffing or planning to staff an SAPCRM initiative. We would characterize the market for independent consultants with functional SAP CRM expertise as somewhat scarce, particularly with respect to 3.0 knowledge. Clients fortunate enough to find such expertise should expect to pay anywhere from $150 - $175/hr and up for proven experience. On the flip side, technical SAP CRM resources with SD-ABAP, IPC development and/or Java development skills are more readily available, and can typically be identified for hire at various levels of experience between $70 - $125/hr.