SAP Paradoxically Fighting Its Own Legacy

SAP is fighting its own legacy and is, in some ways, running away from its strengths as it tries to increase revenues during difficult economic times.

SAP’s legacy is mixed. Known for selling enterprise resource planning (ERP) software, comprehensive, industry-specific suites that produce reports culled from data from all parts of the organization, it is equally known for delays in bringing new products to market, inflicting long implementation times, charging high license and maintenance fees, and for products that are difficult to use.

It has recently begun selling less complex, more user-friendly systems that are intended to help salespeople manage their accounts more effectively, with a particular emphasis on the fertile small- and medium sized business (SMB) segment.

Those systems, known as customer relationship management (CRM) applications, are easier and less expensive to implement, and are easier for buyers to justify because they are supposed to help generate more sales.

But the paradox for SAP is that many of the arguments it puts forward for its new products are tied to its past. Volker Hildebrand, a head marketing strategist for SAP, admitted to me that, “we’ve had to fight our own legacy as an ERP vendor.” But it’s difficult for the company to distance itself from something that is one of its principal selling points.

SAP introduced a CRM product for the SMB segment in July 2008 which includes a more contemporary-feeling user interface that Volker says was inspired by Web 2.0 companies like Google and Facebook. This is a stark contrast to its earlier applications, which required customers to undergo extensive training before they could use them. With the new product, “we don’t want our users to learn anything; it should all be intuitive,” Hildebrand said.

The new product is SAP’s first stand-alone CRM product for the SMB market, and Hildebrand told me, “it’s making a huge impact in the marketplace.” But it also designed the product with an eye to selling customers upgrades to more expensive systems, and indeed one of the strengths SAP touts is that it works well with ERP suites including those of its fiercest rival, Oracle.

SAP also competes with Microsoft and Salesforce.com in this space, but feels it has a distinct advantage against those companies because it can customize applications for particular industry verticals. Microsoft and Salesforce.com rely heavily on systems integrators to do this for them.

SAP has taken steps to change the perception in the market, in part by introducing those more user-friendly design elements to its CRM product. It has also adapted to the changing habits of the workforce by introducing versions of its applications that function on smartphones and other mobile devices.

It has also promised a Web-based CRM tool, Business byDesign, but for the time being that product is only available to a limited number of test customers. SAP says its customers are very pleased with the new tool, but its inability thus far to make it generally available is yet another reminder of its legacy for complexity and lengthy implementation cycles.