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RealMarket caught up with Darc Dencker-Rasmussen on the heels of a good Q1 financial performance and just prior to their annual US user conference, SAPPHIRE. In this interview, SAP's CRM chief discusses their recent claim of the number one spot and how SAP is leading the way with an application and technology platform to drive the next generation of CRM.

Darc Dencker-Rasmussen,
Vice President Global CRM Initiative, SAP


 
RealMarket: You talk with CEOs from leading companies. What do they see as the number one customer issue or opportunity facing them today?
 
Dencker-Rasmussen: These days CEOs are interested in taking advantage of the growth afforded by the economic recovery. During the recent slump companies were focused on cost containment to increase profitability. Now they are looking for innovative solutions to grow revenue and increase market share. There still remains a healthy level of due diligence when deciding where to invest as part of an overall strategy. Customers today have concerns about point solutions not fitting into their long term plans.
 
At the same time, customers now realize that the window of time where innovation provides a competitive advantage is getting shorter. This is driving a need to innovate faster. Customers must be able to adapt business processes, distribution and services to new opportunities and changing customer demands. SAP is leading the way in addressing these needs with products like mySAP CRM and NetWeaver.
 
RealMarket: Can you share some SAP customer examples that highlight this issue?
 
Dencker-Rasmussen: I can think of three good examples. First, Brother Int’l. established a service call center for home office products. They utilized our products to establish a real-time customer feedback loop and then linked the feedback directly to product development for product enhancements and upgrades.
 
Tyson Foods wanted to automate the full cycle of trade promotion management (TPM). Trade promotion, when properly managed, includes CRM, supply chain, finance, and inventory. The TPM system from SAP gave Tyson the opportunity to win new customers and experience lower margins thru operational efficiencies.
 
Finally, we had a new announcement yesterday. Forest Pharma will implement mySAP Business Suite for 5000 employees involved in customer service and sales and integrating with existing solutions through SAP NetWeaver.
 
We see customers today looking for solutions that address a broader end-to-end strategy while looking to modular implementation for incremental ROI.
 
We see more and more customers getting better ROI from their CRM by not limiting their objectives purely to short term gain.

 
 
RealMarket: In an interview we did with SAP executive Michael Park 20 months ago, he mentioned that SAP had a long term goal of being number one in CRM. Recently your company highlighted a UBS study that showed SAP as number one in CRM. How important is it to SAP to be number one?
 
Dencker-Rasmussen: We’re certainly pleased to achieve our objective of being number one. It is very important. It’s a powerful proof point that we are delivering the best solutions. More important to us, however, is helping customers achieve their goals. We made an unprecedented investment in mySAP CRM and our growth is testament to the effectiveness of our products. Becoming number one and growing to more than 2600 customers worldwide means customers agree with our vision.
 
RealMarket: Earlier you mentioned the importance of due diligence when making an investment in CRM. How does SAP address this desire to see demonstrated ROI with prospective and current customers?
 
Dencker-Rasmussen: That’s one of the healthy outcomes of the tough economic times. We see more and more customers getting better ROI from their CRM by not limiting their objectives purely to short term gain. For true long term growth and real returns, customers need to work with a vendor to improve processes that have the greatest return.
 
We see customers considering three important factors in their decision process. First, customers look at CRM incrementally seeking return as it is being implemented. Next, customers see the incremental value from integrating the customer-facing functions such as sales, marketing and support. The third factor is the integration of all systems across the enterprise. This cross-enterprise integration is not limited to the areas most people refer to as CRM today. It expands to additional business processes such as quote to cash. Peppers & Rogers Group, Gartner and others have documented SAP’s CRM success. These include Brother International that achieved a 129% return, ratiopharm that realized a 64% return, Waters Corporation, has seen a 35% return, and Avid Technology which benefited from a 68% return.
 
Because of our presence, companies know SAP can support them globally. The greatest growth opportunity for CRM however is still in North America and mainly in the US.

 
 
RealMarket: The small to medium business (SMB) market segment has received quite a bit of attention from the enterprise players over the past couple of years. How do you view that opportunity today?
 
Dencker-Rasmussen: We’ve certainly followed the estimates from Gartner. Gartner is predicting revenue of more than $960M in 2004 for CRM in small to medium businesses (SMB). Large companies will still contribute the bulk of revenue however the growth will come from SMB. SAP is already experiencing this situation as 60% of our current customers fit in the SMB category. SAP is looking to expand our SMB plans and we are viewing it more strategically than our competitors. We have found that our products meet the needs of companies of all sizes.
 
We currently provide three offerings of CRM that include mySAP CRM, mySAP All-in-One, and SAP Business One. With these three, we achieve greater efficiency among parent companies, partners and subsidiaries as each can be running any of these products and they will integrate and work well together. SAP is not as concerned with the delivery mechanism as are many of our competitors. We want to be able to work with companies as they grow. Waters is an example of that as they have grown from around $300M to almost $1B since we started working with them.
 
Our strategy with small and medium business is to ask “How can SAP help them grow?” It’s really an approach that says you can’t settle for CRM in just one area such as sales automation like you might find from some hosted applications providers today. At the end of the day, it’s about connecting all customer touch points across the company. This requires integrated solutions like mySAP CRM regardless of company size.
 
RealMarket: Is the fact that SAP provides ERP changing in importance to your current and potential CRM customers?
 
Dencker-Rasmussen: The importance remains the same. Companies continue to be frustrated with cost of integration and our solutions help them address this by integrating seamlessly and quickly across enterprise. A new customer can start with CRM or ERP stand-alone. Canada Post started with CRM and then followed on with ERP. They are concerned with achieving full integration quickly and need packaged solutions that will deliver functionality quickly. There is a need to weave CRM with the entire infrastructure. This is showing up in the expanding area of analytics. Applications need to be able to integrate deep to mine data and that further drives the need for CRM and ERP integration to uncover cost savings. SAP NetWeaver is delivering against this need. Integration is a great selling point because it makes a big difference in making projects successful and driving ROI. Adobe and Dial both chose our solutions because of integration within SAP architecture.
 
RealMarket: Geographically, where do you see the opportunity for SAP to grow?
 
Dencker-Rasmussen: SAP already benefits from a broad global reach. We have over 22,600 customers located in more than 120 countries running SAP applications. This provides a large base from which to grow our CRM market. Because of our presence, companies know SAP can support them globally. The greatest growth opportunity for CRM however is still in North America and mainly in the US. Interestingly enough, global reach helps SAP in the US as many of these companies also maintain a global presence or global partnerships. Consequently, they need a partner that has the same global reach. SAP is uniquely qualified to handle this. Many competitors have withdrawn from a large number of international markets. SAP is enjoying growth in Asia and China where competitors have scaled back or withdrawn and this is helping us gain market share in the US.
 
Our growth is a combination of replacement of competitor and legacy systems as well as filling in around point solutions that were implemented as a result of previous tactical decisions. Dial Corporation is an example of a direct replacement. Dial replaced three different systems with SAP solutions to deliver on an enterprise wide strategy, drive greater ROI and simplify their vendor and support situation. Adobe also wanted to run a lean, cost effective IT infrastructure so the Adobe management team made the decision to replace multiple vendors’ products with an enterprise wide solution from SAP.
 
While Web services make it easier they are not a panacea for the application integration challenge on their own.

 
 
RealMarket: Web services have certainly changed the application integration landscape. What effect is this having on the application suite versus best-in-breed competition?
 
Dencker-Rasmussen: With NetWeaver, SAP has pioneered delivering on an application and technology platform which includes Web services. While Web services make it easier they are not a panacea for the application integration challenge on their own. A challenge that includes creating one value chain that encompasses both the supply chain and the demand chain and which cannot be addressed through Web Services alone. SAP NetWeaver is delivering against this challenge in a way that competitors are only just beginning to understand but don’t have the platform, reach or financial capacity to address from an R&D perspective. With NetWeaver, SAP has the ability to integrate people, information and business processes across organizational and technological boundaries. The platform consists of six different areas: In addition to these six areas, NetWeaver is further enhanced by tools like the composite application framework that allows customers to quickly adapt their business processes to take advantage of new business opportunities, market events, mergers and/or acquisitions. They can do this by changing their business processes themselves using the composite application framework or by purchasing a composite application package from an increasing number of SAP partners that have built solutions on the SAP NetWeaver platform In this scenario the suite versus best-in-breed competition becomes irrelevant because the suite achieves the best-in-breed levels of functionality but only the suite has the capability to adapt quick enough to the fast pace of change in today’s economy. Web services don’t do it all. Only with SAP NetWeaver as an application and technology platform, of which Web Services is a part, can enterprises achieve the agility to be more competitive and grow in today’s economy.
 
RealMarket: How do you see the recent activity around business process management and analytics/business intelligence affecting the market and your product offering?
 
Dencker-Rasmussen: Many companies can capture customer data but not many allow a customer to use customer data to predict future behavior. In addition, unstructured data accounts for 80% of data but most analytics applications depend on structured data. With mySAP CRM analytics, SAP can access all of the valuable data. Analytics has always been at the core of the mySAP CRM application architecture. The integration across applications turns static data into actionable business insight with both structured and unstructured data. Customers can transform business processes by embedding the analytics into the process. For example analytical intelligence reduces the steps required for campaign management by knowing what customers to market to and how to contact them. Consequently, our customers spend less time focusing on designing and delivering the campaigns. Our analytics have also helped deal with new financial regulations such as Sarbanes-Oxley. Our deep analytics allow companies to achieve insights that would not normally be available.
 
On Demand solutions are like a candy bar, when you are hungry…it satisfies you for a short time but does not provide sustainable nourishment.

 
 
RealMarket: 1. Hosted solutions became a very hot issue during the recent economic downturn due to the initial cost savings. As the economy begins to recover, how do you see this changing?
 
Dencker-Rasmussen: Hosted solutions in the true sense are solutions where the technology is outsourced to an external provider in a one-to-one model and where the customer retains full control of the application and their business process design. Hosting is a business that SAP Hosting actively engages in with many of our customers. This is very different to the On Demand offerings that have recently gained notoriety in the market. These are a one-to-many model where the business process is predefined as part of a technology “shoe box” approach, with little or no business process configuration capability and virtually no connectivity with the rest of the enterprise applications. With specific reference to the On Demand model, SAP is looking to engage with customers in a sustainable fashion. The current On Demand solutions are a short-term fix. The slower economy forced companies to show quick returns. On Demand solutions cost less early but can cost more in lost opportunities over the long run. If they are just looking to do SFA, then On Demand can provide this short term fix. But SFA disconnected from the rest of the enterprise is not true CRM. For companies that want to connect all touch-points, On Demand solutions and point solutions won’t provide these capabilities. They will not help companies change their business models. For example, in an ROI study by Gartner for Mascot International in Europe, this SAP customer achieved 272% ROI. That cannot be done with a tactical quick fix.
 
On Demand solutions are like a candy bar, when you are hungry…it satisfies you for a short time but does not provide sustainable nourishment.
 
RealMarket: Looking to the future, what is the biggest change you see on the CRM horizon?
 
Dencker-Rasmussen: The CRM space has been through healthy growth from point solutions that merged into the broader category we now call CRM. Companies are now moving beyond functionality based CRM to the next generation of CRM. This entails end-to-end process integration across the enterprise. Process integration that is based on a deep vertical expertise such as addressing the specific channel management needs of high-tech or the regulatory aspects of the pharmaceutical industry. Successful companies deploying CRM will transcend the business ecosystem and not just focus on front or back office. Successful companies will need to innovate and change their business processes quickly to take full advantage of new opportunities, avoiding the pitfalls of cost and time trying to hobble point solutions together. Changing market conditions, new market demands and customer demands will drive the evolution to a holistic system that will favor companies that can quickly adapt to new market conditions.. We see our future as helping customers achieve a balance and excellence in customer-centric focus, operational efficiency and innovative capability along with critical ability to transform business processes quickly.
 
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