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SAP's entry muddles the hosted CRM market

With the arrival of SAP's long-awaited on-demand CRM offering, which competitor is hurt the most and who will emerge?

NEW YORK -- DuPont Chemical Co. has some experience when it comes to CRM.

The Wilmington, Del.-based company has legacy applications, large vendor tools and running in various divisions. But that didn't stop it from adding one more. DuPont took center stage here yesterday, along with American Standard, as the first customers of SAP's long-awaited foray into the on-demand CRM market.

"[Multiple applications] can work if a sales group is isolated," said Michael Michlovich, marketing and sales IT director for DuPont. "Collaboration really requires standardized data models."

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That's why DuPont joined up with SAP early. The company had great success with SAP in its back office and wanted to extend the integration, but SAP's on-premise application, mySAP CRM 4.0, wasn't going to do it.

"Companies like us have serious headwinds against us," Michlovich said. "We can't wait two years for a return on CRM. We spent a lot of time maximizing our back-office gain. We came to [SAP] with: 'How do I expose the back office to the front?' The enterprise 4.0 won't work. It's too heavy, too hard, too slow and expensive."

SAP's on-demand CRM application is the Walldorf, Germany-based company's response. Initially resistant to the idea of Software as a Service (SaaS), SAP has been dropping hints it would be unveiling a hosted application since SAPphire, the customer event it held in Boston last March. With this move, SAP takes aim squarely at the vendors like and RightNow Technologies who helped establish the model and have prospered under it.

Yet, DuPont is keeping its seats as well, Michlovich said, citing the application's ease of use and the support it has received from the group using it. Adding SAP's on-demand application provides the benefit of a common data model with the back office applications plus the possibility of a hybrid deployment using onpremise and on demand together in the future. Michlovich said the company would make a business decision on whether to extend to a hybrid model in the future.

The hybrid option is an advantage SAP officials stressed continuously at yesterday's event. The hybrid deployment model was one Siebel continuously championed when it rolled out its hosted application Siebel OnDemand in 2003. Siebel has some customers who have begun using on-premise and on-demand applications together, but the two are not fully integrated. Siebel was formally acquired by Oracle on Tuesday.

"Right now, the company [SAP's new offering] will affect the most is Oracle," said Liz Herbert, analyst with Cambridge, Mass.-based Forrester Research Inc. "We still haven't seen Siebel OnDemand and on premise merge and there's still the integration with Oracle left to go.", which has focused on enterprise-level companies (just the sort SAP is targeting with this release) and has made some inroads into that market, will need to address SAP's entry.

"The value proposition they've been offering is outstanding -- just look at their market share in the last year," said Mary Wardley, analyst with Framingham, Mass.-based IDC. "Add on the option of this alternative delivery based on the same data model as the on-premise and for SAP customers it's a perfect solution. For non-SAP customers, anyone thinking ahead can see this as a wide road map. is going to have to respond."

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