SAP promises new type of hosted CRM service

SAP later this year plans to introduce what it says will be a new model for offering CRM applications, one that combines elements of both hosted and on-demand computing.

"The new model will go in the direction of being hosted and on demand; it will be something entirely new," SAP spokeswoman Iris Eidling said Friday. "And we plan to offer the service to all of our customers, including enterprises."

The plans come as rivals such as Siebel and Salesforce.com seek to win customers, especially among small and midsize businesses (SMB), with attractive pay-as-you-go pricing models for their software.

Eidling could not explain how the hosted and on-demand models would be combined, saying only that features of both would be a part of the new model. "What I can say today is that we will not call the new service 'on demand,'" she said.

SAP defines a hosted service as one in which customers outsource their hardware but purchase a license from the software vendor. An on-demand service, on the other hand, is one in which users outsource both the hardware and the software and which allows them to pay for applications on a usage basis.

"The problem with a pure on-demand model is that customers, who are sharing both their hardware and software with hundreds of other companies, can't easily customize and integrate applications into their systems," Eidling said. "By comparison, a hosted service allows them to make individual configurations."

When SAP announced its second-quarter financial results last month, CEO Henning Kagermann alluded to the company's plans to offer a new hosted CRM service but provided no details.

In an interview with IDG News Service  last year, Kagermann offered a slightly fuzzy picture of where the company stood on hosted and on-demand models.

At the time, Kagermann showed more interest in an on-demand CRM service than in a hosted one. He said SAP had decided to offer some hosted services - not itself but through a small company he didn't name - to gain experience. Kagermann added that SAP did not want to invest in hardware and data centers because it didn't view this business as one that could generate high margins.

An on-demand service, on the other hand, could be "an option in the future," Kagermann said, but one that would require SAP to establish a new business line. At the time he said the company had "higher priorities."

As for allowing customers to rent software on a monthly basis, Kagermann's reply last year was: "We're not like Salesforce.com, where you just switch on service."

Although the planned new service is likely to include the word "hosted" in its name, Eidling said SAP doesn't intend to become a hosting company. "We will be an integrator," she said.

The IDG News Service is a Network World affiliate.