Customer relationship management, or CRM, software, which helps companies interact andcommunicate with their customers more easily, is one of the hottest areas within software, a fact that'snot lost on German software giant

SAP

(SAP) - Get Report

.

Michael S. Park
Vice president of CRM,
SAP

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It recently expanded its sales force for CRM and is expected tounveil its new CRM software Tuesday. TheStreet.com sat down with Michael S. Park, SAP's vice president of CRM, to talk about SAP's efforts in this area.

TSC: How important is CRM to SAP?

Park: CRM is the one of the five key initiatives that will drive growth in the future for SAP. Thereason we're so interested in it is just in North America alone, it's estimated to be a $6.2 billionsoftware license revenue business in 2001. It represents a substantial market opportunity for SAP, butmore importantly for our customers. This represents an opportunity topresent an integrated business process solution for the current customer base.

I think if you look at CRM, and the way that the competition, the guys like Siebel (SEBL) , have defined it today, they didn't define it as a customer action layer. So it's like a management system to manage your customer interactions.

Our approach is a little different. We're sayinglook, CRM is not just about managing the customer interaction, it's about managing a fundamentalbusiness process that you provide to your customer. An example of that would be, for instance, thepharmaceutical industry. They have five to seven different types of customers -- doctors, patients, HMOs. When you look at the way a pharmaceutical company engages with each of those customers, they engage in a different way. So what you have to have is a complete solution. Youhave a process that manages the interactions based on what the customer requirements are. We call thisthe customer interaction cycle.

The stuffwe've built in the past has been focused on the enterprise. The stuff we are building in the future,consistent with CRM, is focused around customer interaction and customer management.

TSC: What about the competition in CRM? You mentioned Siebel. Who is the competition for you,and what are you seeing out there when you go up against them?

Park:

I think we're in an interesting market now. We are seeing a market slowdown, and what thathas enabled us to do is really to catch up in the context of our broadening the offering for the solutionthat can go head-to-head. When we look at the capabilities in the context of our competition, again eachof our competitors has taken a different strategy for how to approach it, and I think collectively ourstrategy seems to be more along the lines of operating against a customer interaction cycle, and abusiness process to deliver a true customer value.

If you can give a customer thecapability to do business the way they want to do it, not just from an interaction perspective, but alsothrough the entire business process, then you create value for them. So this isn't just about managingcontacts and managing opportunities, it goes much broader and much deeper than that.

TSC: So competitors typically would be Siebel and who else?

Park:

The standard competitors that you see in the market today are basically the same oldgang. Siebel is the point solution provider that has the most bells and whistles in the space.

Oracle

(ORCL) - Get Report

and

PeopleSoft

(PSFT)

are other new market entrants.

The difference is thatwhen you think about CRM, at the end of the day all customer interactionfocuses down to order management, whether it is the ordering of products or services. That's thebusiness that SAP has been in for 29 years. It's only a natural extension on behalf of our customers toprovide this integrated capability.

TSC: Historically, one thing that SAP has been challenged by is the perception of integration issues with its software in actually getting it installed at a companyand making it work. How are things going along that line, and what are you guys doing to get the marketpast that?

Park:

The infrastructure you deploy to manage an enterprise is not an easy one. It'snot as simple as installing a CRM system. I think that some of those market perceptions are ill-conceivedin the context that it does take a lot of time and a lot of effort to incorporate an infrastructure thatbuilds and drives your entire manufacturing process.

If you look to the research that's out there and thefact that nearly 80% of all software implementations fail today, I think part of the reason is becausea lot of people have been focused on selling software licenses out there. The reality is that it is important and it's a component of the total solution

but you need to be thinking comprehensively about the other aspects of integration to be successful.

TSC: Let's talk about business. How has business been in this quarter specifically? Analysts todayare starting to say, look, we knew things were bad, but now it looks like it's even worse. Are things worse than we thought?

Park:

Well, I can't comment on what's going to happen in the future, but certainly if you look backhistorically, and compare this past quarter to the first quarter,

we've grown the CRM businessquarter-to-quarter at 55%. This in a market where Siebel had to downwardly adjust their growthestimates. So I think the momentum for CRM is pretty strong.

TSC: So that was two quarters ago. How are things now?

Park:

One quarter ago. The only thing I can comment on is that things are going according asplanned. I think what we're seeing with the slowdown of the economy, and the investments that our15,000 customers made in the SAP infrastructure, I think what is happening is it's forcing them tore-evaluate the investments that they've made.

TSC: When you say things are going as planned, what do you mean by that? SAP has reiteratedguidance the first nine months of the year. Obviously, the stock has gotten hit pretty hard in the last weekor so, as have a lot of other software stocks. If SAP is reiterating its numbers, and you're saying thingsare on plan, are things better than perhaps the stock's action would indicate?

Park:

I don't know how the market values our stock. If I did, I wouldn't be working this job. What Ican say is that the focus we have on CRM is a substantial one, and we are executing against plan toreally build out the infrastructure we need from a development and marketing perspectiveand going to market with sales, presales, partners and alliances in addition to professional services.

We have roughly 1,000 developers who have been head down for the last nine months on this CRM product that's shipping. We are aggressively building direct sales and presales capability to the point where we will have combined, worldwide, 400 direct-sales and presales people who live and die by CRM numbers.