What free products tell us about strategy

This was the headline of a CIO Magazine article last week.  It’s an old story being replayed in these lingering stressed economic times. Take a product that noone seems to be buying, give it away for free, and hope to eventually make some money down the road in maintenance fees.

This announcement is interesting in several different ways.

First of all, it reveals several things about SAP’s strategy.

1. Evidently, the SAP CRM dog isn’t hunting.  Contrary to SAP’s, and their Analyst’s, proclamations to the contrary, their customers aren’t beating a path to their CRM door.  Did Toyota have to lower the prices of their Prius when gas hit $4 per gallon in the US a couple of years back?  No way.  Just the opposite.  They charged a premium and still had a waiting list for deliveries.  If you have something people want (or need), they’ll spend money for it.
2. SAP continues to lust after the mid-market.  This free CRM program is targeted at SAP’s mid-market Business All-in-One customers.  By definition, this is the market segment that has all of the business challenges of their multi-billion dollar colleagues but only a fraction of their resources.  What SAP is missing is that when looking at Total Cost of Ownership (TCO) CRM license fees may only be a drop in the bucket.  Our intelligence suggests that the cost and complexity of implementation far outshadows the initial license fees of the software.  If SAP really wants to make a dent in the mid-market, that is the problem they should tackle…simplify the implementation. Granted that that’s much harder than simply issuing a press release that lowers the product’s price.
3. SAP’s partners are the primary beneficiaries. It probably takes a month to sign a contract for these CRM licenses.  It will take at least a year to implement them.  With 3-5 onsite consultants required for the duration, the SAP CRM Consulting job market has just received its very own  economic stimulus plan.

Secondly, it directly impacts b2b2dot0?  But how?  The answer is anywhere from not much…to it’s great news!

1. Not much – Frankly, Sales Order Management (the core of the value that b2b2dot0 focuses on), doesn’t seem to be the primary focus of SAP’s CRM.  In fact, every single one of our clients has looked at CRM…or actually owns it…and has decided not to implement it for B2B eCommerce.  It’s simply to expensive and complicated to implement.  I know of only one situation where b2b2dot0 “lost” to SAP CRM and that customer is still 12 months away from going live.  If you’re looking at SAP CRM’s marketing, lead & account management or service management capabilities, than that’s a whole other story.  That’s where SAP CRM…integrated with SAP’s ERP…should become the industry’s defacto standard.
2. Welcome SAP – Anything SAP can do to enlighten their customers that they should leverage the internet to transact business with their customers is in our favor.  We experienced that back in the late 90’s when SAP jumped on the eCommerce bandwagon by introducing Internet Sales…which they still give away for free.Our clients know that sometimes “free” can be very expensive.

   When you start adding up all of the salaries, and consultant invoices, that you have to pay to implement and support your free software, you start to feel like you should have read the fine print :-(

   To be sure, we always have to answer the question “why should I spend money with you when SAP has already “bundled” all of the software that I need (can you spell a-n-t-i-t-r-u-s-t?).  But we, and our references, are getting pretty good at illuminating the truth.

I can only hope that every single SAP Business All-in-One customer takes them up on their promotional free CRM offer before it expires at the end of this year.  That will keep us quite busy in 2010 and beyond!

Sam

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