SAP is preparing to launch a new cloud CRM product at its upcoming Sapphire event in June, in a bid to overtake the current market leader Salesforce.
Speaking on an earnings call for Q1 2018 this week, SAP CEO Bill McDermott fired the first shots in what could become a heated war of words between the two major vendors.
"So called cloud CRM is nothing more than overpriced software running on first generation SaaS architecture," he said. "This is probably why so many have responded so eagerly to SAP's recent statement about a new vision for CRM. They know, change is coming, we are coming."
This move comes in the wake of an indirect access scandal which has seen customers like Diageo effectively punished for using Salesforce software on top of their SAP ERP systems. It also follows the recent acquisitions of Callidus Cloud and Gigya, which at the time were referenced as useful assets for SAP to enhance its customer relationship management (CRM) software offering.
Going further McDermott responded to an analyst question by stating: "Basically we are going to rebrand the whole CRM category, it’s going to be a massive movement at Sapphire and we're going to show every customer that they can be a best run business by running SAP and no longer do they have to be relegated to an outdated sales platform with complex integration layers trying to get that data out of the ERP system."
SAP is already the second placed vendor in terms of CRM market share, according to some 2016 Gartner research, but is seemingly not content with second place. Other major players in the market are Microsoft with Dynamics 365 and Oracle.
It's difficult to say how much of SAP's position here is remaining on-premise CRM, and its cloud CRM is confusingly branded as SAP Hybris Cloud For Customer, so expect the relaunched product to be heavily cloud-leaning.
"There was a time when a market leader was dominating in CRM. It was said that they couldn't be disrupted. Well, let's be clear once again, we want CRM," he said.
These comments come at a time when SAP customers are creating a stink over being charged for 'indirect access' to SAP systems when using SaaS applications, like Salesforce CRM, on top of data sitting in SAP systems.
McDermott made it clear on his earnings call that he would rather wash his hands of indirect licensing. "So what has changed was the indirect access pricing model to allow for that customer satisfaction to take place and take away any anxiety from the equation," he said. "Before doing so, we had carefully modelled the revenue impact that such a change would have and essentially the way we reconfigured the pricing methodology, it’s a wash."
"So customers are much happier, no more noise on the pricing, the access is simple, the pricing basically breaks even. So a non-issue."
Read next: SAP indirect access explained
Perhaps McDermott sees an opportunity here to kill two birds with one stone: why bother dealing with any risk of indirect access when you could just run your CRM on top of the existing data and have an all-SAP shop? This could well be the crux of his pitch to customers at Sapphire in June.
"We are going to seamlessly integrate it out-of-the-box, it will be in the cloud, it will be tailored for their industry and it will be ready to run," he said.
The recent acquisitions of Gigya and Callidus Cloud have also given SAP fresh impetus to further compete in the CRM space.
"We will introduce a truly comprehensive portfolio of solutions to transform the front office. Our objective is simple, help legacy CRM go to the way of legacy database. No other company has the capacity to do it, we do.
"That's why companies like Unilever, Jaguar Land Rover and Coca Cola [all Salesforce customers] selected SAP Front Office Solutions in Q1," he said.
War of words
In another very clear dig at Salesforce and its CEO Marc Benioff - without mentioning them by name - the SAP CEO said: "We didn't need to exhaust our balance sheet to buy an integration platform, we already have the best, the SAP Cloud Platform."
Salesforce recently made its largest ever acquisition of integration specialists MuleSoft for $6.5 billion, and launched what is calls Integration Cloud as a result.
The cloud CRM market leader is used to being called out in earnings calls though - Oracle and Microsoft have been doing it for years - but none have been able to halt its market progress, which culminated in a $10 billion run rate as of last summer.
McDermott continued: "Clearly, legacy CRM platforms aren't going to get there. And that's why you are seeing them develop a strategy around even more M&A, even when the multiples make no sense whatsoever, because they don't have the ERP and now they have to come up with some methodology to connect all this complexity, which is where we come in, this is what we are really, really good at."
Digging into how it wants to set its CRM apart in the market he played a round of buzzword bingo, adding: "So you'll see us connect the entire value chain from the consumer all the way through to the supply chain in seamless, integrated processes by industry and in the cloud.
"We also put deep machine learning AI, IoT and blockchain into the application to make it easier for the customer to consumer this innovation out of the box. You'll see a branding campaign, you'll see a major launch at Sapphire in my day one keynote," he said.
McDermott says that this new approach has been directly determined by customer concerns he hears. For example: "One of the customer meetings I have had with a CEO and his leadership team recently went something like this: 'our price has been raised, we have been nickeled and dimed on every little application imaginable and I’m paying 65% more now for my CRM asset than I was 18 months ago and I'm not seeing the value.'
"So I think some of it will be upgrading SAP's own base. Some of it will be net new because it's a whole new idea when you think about the intelligent enterprise and the end-to-end and clearly some of it will be replacement where customers now will have an alternative that will be marketed properly, invested in properly and the customers will say, given the choice if I could do it through end-to-end without all this complexity and I can get more value from it. Why wouldn’t I?"
Computerworld UK will be in Orlando for Sapphire later this year so check back for all of the details from McDermott's day one kenyote.