Has salesforce disrupted the CRM market against SAP AG?

This is the third blog post on the series to understand and evaluate technologies with disruptive potential in the software industry.

In the first blog post, we summarized a pragmatic framework by Keller and Hüsig (2009) to help evaluate the potential of disruption between two software companies. In the second post, we applied that framework to the example of Google Docs (web application based) and Microsoft office (primarily desktop software based) – two formidable players in the office productivity tools’ market.

The focus of this blog post will be applying that framework to yet another example to solidify our understanding by using N Katenecker 2013’s paper on disruptive potential of software a service. Below, I summarize the application of this framework to the CRM (customer relationship management) market. The two disruptive competitors are Salesforce and SAP AG.

“Disruption is a process, not an event, and innovations can only be disruptive relative to something else” (Clayton Christensen). Therefore, we will evaluate the process of Salesforce potentially disrupting SAP AG with its cloud-based CRM software solutions.

Overview of the CRM software market and its potentially disruptive technology

Salesforce has been a pioneer of cloud-based CRM software. It’s infamous “no software” logo has been core to its branding in the early years. Whereas, SAP, has been selling CRM software as an on premise solution. However, they have now also entered the cloud-based deployment of their CRM software.

Similar to Google Docs versus Microsoft Office, the technology in question here is the cloud-based delivery model of the CRM software. More specifically, understanding the process and extent of how strong is salesforce disruptive potential against SAP AG?

Conclusion of evaluation of Salesforce’s potential and progress so far to disrupt SAP AG

The research authors conducted the analysis using N Katenecker 2013‘s criteria sheets and trajectory maps. Here are the results:

Criteria sheet for SAP AG to evaluate disruptive potential of SaaS - N Katenecker 2013
Criteria sheet for SAP AG to evaluate disruptive potential of SaaS – Source: N Katenecker 2013
Criteria sheet for Salesforce to evaluate disruptive potential of SaaS - Source: N Katenecker 2013
Criteria sheet for Salesforce to evaluate disruptive potential of SaaS – Source: N Katenecker 2013
Trajectory map for Salesforce and SAP to evaluate disruptive potential of SaaS - Source: N Katenecker 2013
Trajectory map for Salesforce and SAP to evaluate disruptive potential of SaaS – Source: N Katenecker 2013
Trajectory map for Salesforce and SAP to evaluate disruptive potential of SaaS - Source: N Katenecker 2013
Trajectory map for Salesforce and SAP to evaluate disruptive potential of SaaS – Source: N Katenecker 2013

From the criteria sheets and trajectory maps above, the follow points were noted by the authors:

  • Table 1 – Criteria Sheet SAP AG: SAP has implemented a “response strategy” in which it has also begun offering the cloud-based deployment of CRM software. However, it is unclear that the cloud-based SAP solution is targeting non-consumers. Overall, there response shows weak indication that they have prevented the impact of potential disruption by Salesforce.
  • Table 2 – Criteria Sheet Salesforce: Salesforce’s criteria sheet shows strong indication that they have made significant progress in all three phases (foothold, main, and failure of incumbent) to sustain the disruption potential of their cloud-based CRM solution.
  • Table 3 & 4 – Trajectory Maps: “We see that the results are in line with Christensen’s theory. The entrant’s price remains below the incumbent’s price and the number of features offered by the on-demand product reaches market demand while staying way behind the on-premises offer.” Source: N Katenecker 2013
  • Notes for the Future: “Right now, the chances of both companies surviving are high, and it is unlikely that SAP will disappear because of the disruptive innovation. The analysis process is about the potential and probability of disruption and not the final result which is disruptiveness” Source: N Katenecker 2013

This example, along with the series, has solidified my understanding on how to evaluate the disruptive potential of a software as a service web application to its competitor. I hope to keep a close eye on how these two companies pan out in the future to further build on this analysis.

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