SAP dips its toe in the e-commerce pool

Jon Reed Profile picture for user jreed June 5, 2013
Summary:
SAP goes on another shopping trip. This time it's e-commerce automation with the acquisition of hybris. What do we think? Not a lot but we are prepared to be surprised.

hybris
In a move that surprised most - but in retrospect seems not surprising at all - today SAP announced the intent to acquire hybris, an e-commerce infrastructure company. Pricing terms of the purchase were not disclosed, although smart Alecs reckon it is in the $1.2-1.5 billion range. Given SAP's propensity to pay a premium in recent times, nothing would surprise. We will have to wait for future financial statements to discover the realité.

With hybris in growth mode citing revenues of +$100 million, this is shaping up as a sizeable acquisition but an order of magnitude smaller than Ariba and SuccessFactors. During the media call, uber-confident co-CEO Bill McDermott said: “We fully intend to unleash the will of SAP on the CRM marketplace.”

Oh boy. Does McDermott honestly believe customers want to hear that? There was a time when those words might have been well founded. Today, they sound hollow.

Why now? After taking a beating in CRM for more than a decade, first at the hands of Siebel and then from Salesforce.com, it seems a strange time for SAP to declare its intentions to conquer a market that is hardly a green field.

The answer lies in SAP’s belief that HANA gives it the edge to go after today’s social customer in real-time. Essentially, SAP believes that the emergence of the mobile/social customer has put the CRM market up for grabs again. Another (not small) factor: with the continued struggle of retail in the face of online commerce, comes the claim that many of SAP’s B-to-B flagship customers are eager, if not desperate, to interact directly with their own customers.

This fact is not lost on SAP. But social interaction is one thing. Today’s online success stories are about consummating transactions, not simply achieving high traffic volumes.

Monetizing the social customer has been a struggle even for the likes of Facebook. It make sense that SAP would want to provide real-time, ‘omnichannel’ promotion and transaction capabilities to its customers. That’s the motivation behind the hybris purchase. Even then this is not a done deal. Dennis Howlett, who has been at AribaLIVE in Berlin this week tells me less than five percent of Ariba customers are remotely close to fully fledged, end to end procurement.

One of the biggest takeaways from Sapphire Now 2013 was SAP’s determination to position itself as a 'B to B to C' company. As McDermott sees it, the hybris acquisition is another big step in that B to B to C direction. That's all very well but you have to be a solid B2B provider AND have customers talking that last mile to get to C.

Battles real or imagined with Salesforce.com were clearly top of mind, with both McDermott and co-CEO Jim Snabe taking not-so-veiled shots at Salesforce.com’s recent Exact Target acquisition. Without referring to Salesforce.com by name, McDermott dismissed email marketing as irrelevant to real time customer interaction, calling the unnamed ExactTarget acquisition ‘quite puzzling.’

On several occasions, McDermott and Snabe turned down the chance to disclose or hint at the purchase price for hybris. McDermott did say the purchase price would be commensurate with the fastest growing company in the e-commerce market, which he characterized as having much higher valuations than email marketing vendors (another jab). During the short call, neither CEO elaborated on SAP’s plans for the marketing side of CRM, where email marketing would factor in – and in fact still does – regardless of what SAP might wish.

Verdict

It’s hard to knock the motivation behind the purchase: serving the realtime customer with an omni-channel approach. The problems occur when you dig. SAP still seems to perceive CRM as a ‘hybrid’ market, whereas most observers believe CRM moved to the cloud a long time ago. Snabe asserted during the press call that most of hybris’ customers prefer to handle their ecommerce installations on-premise. If SAP is right about large enterprise customers being open to on-premise CRM, suddenly SAP seems right in the thick of it with a HANA-driven CRM offering. But what if that ship has already sailed?

SAP will rightly argue that you can go to the cloud now with CRM of any variety at SAP, meaning heading to the HANA Enterprise Cloud. But now we’re talking about new licenses - something SAP's own customers have complained to me about with past acquisitions.  Now we're talking new licenses for HANA, and likely new licenses for hybris functionality. Is that the right approach? Customers will have the final say.

SAP’s commitment to its own cloud CRM products has not been clear either – at least to me. This is another area where customers will have to dig further.

SAP is promising a range of deployment choices, but which functionality is available on-premise, which via the (hosted) HANA Enterprise Cloud, and which through the Cloud for Customer LOB SaaS offerings?

Rather than seeking to 'impose its will,' SAP needs to address these questions.

Loading
A grey colored placeholder image