As the world’s largest provider of enterprise SaaS apps (that would be Salesforce) prepares to face a head-on assault in the $120-billion CRM market from the world’s #1 enterprise-apps provider (that would be SAP), you can bet the mortgage that the biggest winners of all will be business customers who’ll stand to gain huge value from the fruits of this bare-knuckles competition.
To be sure, Salesforce and SAP each stand to reap big benefits as well as they roll out new bundles of cloud CRM services that offer businesses new ways of engaging with customers and prospects, new ways of bringing real-time intelligence to sales organizations, enriched 360-degree views of customers, and big progress in fusing demand chains with supply chains.
But if it’s true that successful digital transformations are totally centered on the customer, then the enhanced and accelerated innovation that are always the by-product of extreme competition among high-performance tech vendors will no doubt unleash in the business world new and unprecedented CRM capabilities to drive new levels of customer engagement, new levels of growth, and new ways to identify and exploit market opportunities.
Without question, Salesforce is the king of the CRM world. From a Bloomberg article on Salesforce’s blowout Q1 earnings report: “Salesforce dominates the market for customer-relationship software. The company had 19.6 percent of the market in 2017, according to industry research firm IDC. Oracle was No. 2 with 7.1 percent, and SAP SE had 6.5 percent. Microsoft and Adobe rounded out the top five.”
And on its May 29 FY19 first-quarter earnings call, Salesforce once again delivered excellent results across the board for the 3 months ending April 30:
- Q1 revenue jumped 25% to $3.01 billion;
- Total future revenues under contract but not yet recognized reached $20.4 billion, up 36% from the prior year;
- Future revenues under contract and expected to be recognized within the next 12 months reached $9.6 billion, up 26%; and
- Salesforce raised its full-year FY19 revenue guidance to a range of $13.075 billion to $13.125 billion.
In addition, the company’s acquisition of API powerhouse MuleSoft feeds perfectly into Salesforce’s positioning as the company that can help its business customers extract relevant and timely data about their customers from any source and weave it into the deep insights about customer behavior, expectations and requirements.
But as I noted in a recent article here on Forbes.com called SAP Puts Bullseye on Salesforce.com, Launches Plan To Become #1 In CRM, SAP believes it can redefine the CRM space that Salesforce created when it was formed 19 years ago and has led for just about that entire time. In fact, Salesforce over the years has become so synonymous with the CRM category that when it went public 14 years ago on June 23, 2004, it chose “CRM” as its stock-ticker.
SAP CEO Bill McDermott, while clearly aware that his company is a distant third in the category, also believes that Salesforce’s very strength—it has remained focused solely on the CRM space, and has not attempted to expand out into other big segments such as ERP and HCM—can be turned into a liability.
In McDermott’s view, SAP’s massive global presence as an ERP powerhouse—a category that SAP created and has led, just as Salesforce invented and has driven the CRM segment—will become the strategic differentiator in the battle for CRM because businesses can gain high-value insights into their customers by understanding what they buy and how their supply chains work, and then synching up that supply-side data with what’s happening on the demand side.
Here’s McDermott from my recent article about SAP’s intentions to challenge Salesforce in the CRM space:
“With the SAP Cloud Platform and all the assets that we have, we’re in a pole position to create a different argument with the enterprise at the CEO level because as they digitize their business on an end-to-end basis, now we have all those assets plus CRM to go head-to-head with anybody else that’s out there.”
It’s reasonable to assume that SAP will use its huge annual Sapphire event next week in Orlando to offer more details about the new CRM strategy, which McDermott first disclosed in broad strokes in early March at SAP’s Capital Markets Day.
From SAP’s website, the description for McDermott’s Sapphire keynote doesn’t make any mention of the CRM initiative but rather speaks in broad strokes of the “intelligent enterprise”: “SAP CEO Bill McDermott and Guests highlight SAP’s global strategy to create intelligent enterprises that can fuel economies, lift societies, and sustain our environment.”
But 3 months ago at SAP’s Capital Markets Day, McDermott pulled no punches in framing the company’s intentions:
“It’s the customer’s customer, it’s mass customization at scale in a highly personalized way—and that requires a common data model, a common platform and an unbelievable end-to-end capability so that you can satisfy the perfect experience.
“That’s the new CRM. That’s the one SAP intends to take over.”
Well, that notion of “new CRM” is not exactly new to Salesforce. Understandably, McDermott wants to position Salesforce as “legacy CRM” in much the same way that Benioff for years derided SAP and also Oracle as old fogies incapable of transcending the world of legacy back-office ERP.
But if SAP’s going to mount a serious challenge to Salesforce for serious market share in the CRM world, SAP’s ability to succeed will have less to do with Salesforce’s having been asleep at the wheel than it will with being able to deliver that truly end-to-end real-time synchronization of demand chain and supply chain that McDermott described above.
This scrap isn’t about “legacy” anything—quite the contrary. It’s about brilliant and forward-looking innovations from each company, with SAP focusing on tying together across-the-board information from logistics and finance and supply chain and procurement with a modern suite of CRM tools that extend out even to sales-team commission programs via its fairly recent Callidus acquisition.
For Salesforce, it will be about the undeniable synergies it has forged across its flagship Sales Cloud with its Service Cloud, Commerce Cloud and Marketing Cloud—all enhanced by its Einstein AI technology, which Salesforce says is now generating for customers two billion “predictions” per day.
In that way, Salesforce believes it can counter SAP’s intentions by offering its own 360-degree view of the customer, a theme that Benioff and president and COO Keith Block specifically cited 11 separate times during the May 29 Q1 earnings call. Here’s a sampling of how Benioff and Block used that term:
- Benioff: “Only Salesforce is giving customers an intelligent 360-degree view of their customer.”
- Benioff: “In each and every case, [our customers are] working to understand and have a 360-degree view of their customer.”
- Benioff: “…integration is mission-critical for our customers to gain that 360-degree view of their customer.”
- Block: “And take all of these things together, we’re the only company in the industry that can provide solutions as it relates to that 360-degree holy grail of the customer.”
- Block: “This notion of the 360-degree view of the customer is the holy grail and we’ve been talking about it for a very, very long time.”
- Benioff, referring to recent conversation with CEO of “a very large life-insurance company”: “And then at that point, my ability to consult with that customer is really around, okay, now let’s look at each one of your policyholders and your ability to have 360-degree vision with them.”
As Salesforce has done, SAP is assembling its new CRM initiative via organically developed products and some acquisitions:
- Internally developed salesforce automation and marketing;
- Hybris for omnichannel e-commerce;
- Callidus for sales pipeline and quota scenarios; and
- A Configure-Price-Quote (CPQ) product that SAP uses within its own operations.
So: clearly, both SAP and Salesforce are looking to push their CRM capabilities to dramatically higher levels by offering complete and fully integrated views of and insights into customer behavior, buying patterns, tendencies, histories, and related activities.
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Both will bring to bear their extended portfolios of applications, analytics and related tools to give their business customers access to data scattered across various applications, databases, old and new systems, and models.
Both will attempt to assemble solutions that are not merely gussied-up collections of stuff those vendors happen to have, but rather are solutions truly tailored to reflect precisely how complex digital businesses operate here in the middle of 2018.
And in that effort, both Salesforce and SAP will be pursuing big chunks of what Block called a $120-billion market by making their customers better able to engage with, sell to and delight consumers embracing digital lifestyles.
And here in 2018, that is the very essence of what the Cloud Wars are all about.
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