The hidden costs of SAP on-demand

By Robert Westervelt, News Editor 08 Feb 2006 | SearchSAP.com

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SAP's new CRM on-demand platform has a simplified pricing model -- $75 per user is the base price for using either marketing, sales force or service automation modules or $125 for all three suites -- but integrating it with back-end systems and mapping data to the on-demand platform will result in additional costs to many firms.

If a customer wants deep proprietary data exchange, a consultant would be required.  Tony Martinez  vice president of global CRM business strategy,  SAP

"We're trying to keep it really simple with the subscription fees," said Tony Martinez, vice president of SAP global CRM business strategy. "The product is still being rolled out and a lot of initial integration work is going to have a consultant involved."

SAP entered the CRM on-demand market with a bicoastal press conference last week. Executives trumpeted the flexibility of the product and the ability to integrate it into a company's back end systems.

But customizing the software based on individual business needs and the ability to integrate data between on-premise and hosted locations adds complexity that some customers may find unwieldy, according to industry experts. That added complexity could increase costs in the form of consulting fees.

"There are functionalities in existing CRM systems or the ERP back end systems which can be linked into the CRM on-demand system, but today it would require a consultant to do that," Martinez said. "If a customer wants deep proprietary data exchange, a consultant would be required."

For example, if a customer wants to import credit check history or access sales history information, the data has to be integrated into the on-demand system, Martinez said. SAP touts a similar data structure and architecture between its on-demand and on-premise back end systems, but the information that a customer wants to exchange between the systems is going to be the customer's choice, he said.

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Integrating to a company's SAP back-end systems, integrating between non-SAP systems and customizing the software to meet a company's individual business requirements are three areas that could potentially attract consulting, said Srini Katta, an SAP consultant with iServiceGlobe. Katta who is an expert with e-business and CRM implementations said that, at a minimum, a company may need to bring in a business analyst to determine what data is needed and should go beyond a company firewall.

"Every situation is different and every company has varying business requirements," Katta said. "When mapping data there is a filtering mechanism; someone has to understand what data is needed from non-SAP systems and what data is needed for business functions."

Additional support

SAP also said it may test a new support model once the product is fully launched. For now the base per user prices include unlimited end user support and a service level agreement, Martinez said. But SAP will listen to early adopters and is considering breaking out a premium option for companies that need additional support, he said.

"Potentially, as we put out more applications and have more specific customer experiences, we'll look at packaging services," he said.

Customer feedback will also result in additional functionality and the use of composite applications that would made available at an additional fee.

Storage space

In addition, new customers may have to purchase additional disk storage space from IBM hosting services, Martinez said. For example, a large number of attachment files or large images could bloat the amount of hard drive space a company needs, he said.

Additional disk storage space will be sold in 25 GB increments. SAP and IBM won't release how much storage space it will give customers. In contrast, San Francisco-based Salesforce.com lays out how much disk space it gives its customers. The company's enterprise edition offers customers the greater of 20 MB per user or 1 GB in addition to 250 MB of document storage.

"It's just like buying lobsters in that the market determines the price. It won't be a significant cost and it's not a significant revenue area for us," Martinez said. "We believe we will have ample storage space for most customers."

Data from partners

Many SAP customers also get product data and some lead generating data from third party systems located outside the company, such as data from a manufacturing partner or supplier. This could result in additional complexities and further modifications depending on a company's business needs, according to Katta.

"If a company has a provider that furnishes data that results in leads then that company would likely want their system to be integrated with on demand solutions, but it could get complicated because the provider may be using some non SAP systems," Katta said. "Clearly there are still some questions that need to be answered by SAP and that is true with any new application."

This article originally appeared on SearchSAP.com.

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