SAP Steps Up War with Siebel

By reorganizing for the second time in as many years and with new CRM product announcements expected in September, enterprise software giantSAP AG is striving to gain groundagainst archrival Siebel.

The reorganization is intended to increase the global focus of SAP’s operations.Toward that end, SAP has named Leo Apotheker to the newly created position ofpresident of global field operations, reporting directly to co-chairman and CEOHenning Kagermann.

“The global consistency provided by the realignment of our field operationswill ultimately help provide greater accountability and expand our relationshipswith both new and existing customers,” Kagermann said.

Ongoing Battle

Germany-based SAP, the number two CRM provider with a reported 16 percentmarket share, repeatedly has bumped heads with first-place Siebel, whichhas 45 percent market share.

The battle between the two companies heated up when SAP enteredthe CRM arena two years ago and quickly captured a significant portion ofthe market. Since then, the CRM sector, which once enjoyed phenomenal growth,has flattened, leaving competitors to scramble for customers.

“Last year was not [the] best of all years for CRM — it was down a bit, but it couldhave been down more,” Andrew Bartels, vice president of research fore-business applications atGiga Information Group, toldthe E-Commerce Times.

Bad Blood

Siebel has held onto its place as the top CRM vendor despite SAP’s efforts, butother ERP (enterprise resource planning)vendors, such as PeopleSoft, J.D. Edwardsand Oracle, also have made strides. And CRM vendors will face even morecompetition when Microsoft tosses its hat into the CRM ring later thisyear.

“SAP was up a lot [because it] rightfully recategorized a lot of its ordermanagement modules as CRM,” said Bartels. Still, revenue from SAP’s CRM salesin 2001 totaled just $412 million, compared with the $2.05 billion reported bySiebel during the same period.

The clash between Siebel and SAP shows no signs of abating. SAPrecently took Siebel to task in German courts for running ads in Europethat claimed Siebel was the preferred CRM company among SAP-dominatedenterprises. The court sided with SAP, and Siebel had to remove the ads.

Executive Shuffle

In addition to Apotheker’s appointment, SAP’s current CEO overseeing theAmericas, Wolfgang Kemna, has been shunted aside and named vice president of anew division called Global Initiatives. Kemna, who held the CEO post for two yearsafter his predecessor served just a year, grew SAP’s interests in the United States,helping boost business 5 percent domestically from the first quarter of 2001 tothe first quarter of 2002.

But Apotheker, formerly president of the company’s Europe, Middle East andAfrica (EMEA) division, did better, growing the business segments under hisumbrella by 11 percent in the first quarter of 2002 compared with year-ago results.

Former CEO Kemna now will turn his attention, at least in part, to developing andhawking the company’s supply chainofferings.

Foggy Bottom Line

It is unclear how SAP’s reorganization will affect its bottomline, but shares of both companies fell on the news. In addition,Goldman Sachs reduced its earnings forecast for both companies and 24 othersoftware entities, saying companies will not increase spending on businessapplications this year.

According to a Giga Information Group report, total application vendor revenuesgrew 29 percent in 2000 but just 6 percent in 2001.

On the bright side, Bartels predicted, “For 2002 and beyond, we expect to see a reboundin demand. As we move into the year and recovery takes hold, and the fear of adouble dip goes away, companies will turn to CRM revenue growth.”