SAP Grabs Siebel CRM Exec And Stands To Grab Market LeadSAP Grabs Siebel CRM Exec And Stands To Grab Market Lead

SAP's pursuit of Siebel Systems Inc.'s status as the market leader in customer-relationship-management software reached into its rival's executive ranks this week when Patrick Bakey left his post as VP of sales for Siebel's federal government business to become senior VP of SAP's North American CRM unit.

Bakey wasn't available to comment on his move, but AMR Research analyst Laura Preslan says he's following customers that are looking for better integration of CRM apps with other back-end infrastructure software. Preslan says Bakey leaves behind a capable sales team to handle what has become a key vertical market for Siebel, but that Siebel still has plenty to be concerned about from a competitive perspective. "The bigger issue is the strength he brings to SAP in order to compete with Siebel in that area," she says. "They'll start to see SAP more and more in those deals."

Preslan authored a report released last month that predicts SAP will pass Siebel this year to become the biggest generator of CRM software revenue. AMR expects SAP will close the year with 14% of the market, up from 10% in 2002 and more than Siebel's 13% share, which is down from 16% in 2002. According to AMR's research, SAP's CRM revenue grew 30%, from $985 million in 2002 to $1.3 billion in 2003, while Siebel's revenue fell 17%, from $1.6 billion in 2002 to $1.3 billion in 2003. SAP is expected to pass Siebel thanks to 12% growth in CRM revenue this year, while Siebel will grow by 3%, the AMR report says.

"This is a great chance for SAP to say, 'See, they're leaving the former leader and joining the new market leader," Preslan says. She says a big key to SAP's success in the CRM market is the tendency of companies to want to purchase CRM software from their enterprise-resource-planning software vendors. Preslan talked to 24 large customers of SAP's back-office applications who recently shopped for CRM software and found that half never invited another vendor into discussions, choosing mySAP CRM as a logical fit with their existing SAP deployments.

A Siebel spokesman says both Bakey's move and the AMR report should be placed in the proper context. He says executive moves among the application vendors are a persistent reality--in fact, Siebel recently hired former SAP executive VP Eileen McPartland to be its senior VP of global services.

At least one Siebel customer was unfazed by either Bakey's departure or the prospect of SAP taking over the top spot in the CRM market. Siebel "is still one of the biggest companies in the CRM area, and we think they'll have the muscle to support our deployment, and to support ongoing maintenance and product development," says Patrik Riese, director of CRM at Saab Cars USA. "From a customer perspective, it's really not an issue for us."

SAP's rising fortunes in the CRM market make good on assurances its North American CEO, Bill McDermott, made earlier this year, when he declared that SAP's efforts to bring its CRM technology up to par with Siebel and other CRM providers would help it emerge as the dominant player in the market.

But Preslan warns that another player looms on the horizon. She says Microsoft's CRM offering, which is targeted toward small and midsize businesses, is gaining traction with larger companies, and that it will continue to seize market share as it integrates the software with its other products and grows its partner channel.