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Oracle and SAP's vertical CRM battle a narrow one

The fight for vertical CRM expertise rages on, but SAP and Siebel are going mostly against best-of-breed and homegrown tools, not each other, with some important exceptions.

As SAP AG and Oracle Corp. continue to battle and argue over supremacy in the overall enterprise CRM market, customers continue to have a much narrower focus, questioning what those vendors have done in their specific industry.

A recent study by Stamford, Conn.-based Gartner Inc. sheds some light on just which industries are deploying which CRM applications. While companies first and foremost are concerned with integration, industry-specific -- or vertical -- functionality continues to be a major emphasis.

"All of [the vendors] are generally becoming more vertically specific," said Ed Thompson, vice president and research director at Gartner. "Roughly 60-65% of their R&D goes into industry-specific functions. It's not core CRM they're battling on, it's industries' flavors."

Gartner recently studied 258 projects conducted by 30 large CRM consultants and systems integrators. The projects accounted for approximately 65% of all external service spending on CRM projects last year and 85% of projects with external spending of more than $1 million. Separated into specific industries, the two business application titans are not going head to head as often as some might think.

According to the report, Oracle's Siebel and SAP CRM projects are represented in 35 of the 53 industries where service providers are doing major implementations. Of that, the two companies won projects in the same industry just 11 times. @27594

"The net net is, you realize most of the time SAP and Oracle are not competing with each other," Thompson said. "It's usually best of breed or build your own that's the competition. It probably will be that way for several years."

Overall, the study found that Oracle's Siebel CRM applications were the most commonly used, with 47% responding they used that as their main CRM tool. SAP was used in 12% of projects, PeopleSoft in 7% and Oracle E-Business Suite on 6%. Amdocs Ltd., Inc., Pegasystems Inc. and Epiphany Inc. were used on 2% of projects. The numbers are skewed a little toward Siebel because most of the large systems integrators have a specific Siebel practice, Thompson said.

Top dog?

However, the results do indicate that SAP's claims of CRM market leadership are more a reflection of how it calculates license revenue. While SAP is widening the gap in CRM license revenue, much of that is packaged with business suite contracts and the CRM applications are sitting unused. While SAP won't release the actual data, "shelfware is running at somewhere between 70 and 75%," Thompson said.

Broadly speaking, Siebel tends to have a hold in some pharmaceutical and medicine services providers and some financial services like insurance, while SAP is stronger in manufacturing and some utilities. The report also found that Amdocs has a significant presence in telecommunications, along with Chordiant Software Inc. to a lesser degree, and Microsoft has made headway in the public sector.

However, when asked what industry they are in, most customers often respond very specifically, talking about granular "subindustries," Thompson said. That's why Gartner broke business down into 53 of these groups. Of those, Oracle and SAP competed head to head in 11: computer and electronic products; consumer packaged goods; transportation equipment; other discrete manufacturing; electricity and gas utilities; warehousing, couriers and supplier services; professional, scientific and technical services; software publishers; business and consumer services; other government agencies; and wireless telecommunications.

That's good news for businesses in those industries looking to make CRM purchases, because they can now play one vendor off the other in negotiations.

A vertical approach

The vendors tend to take a different approach when it comes to developing vertical functionality, Thompson said. Before its acquisition by Oracle, Siebel tended to focus its efforts more on where it was winning deals, while SAP took a longer-term view, chipping away at a specific industry it had identified, such as in utilities and insurance where it has seen success. Oracle tended to sit between the two, not as alarmist and quick reacting as Siebel but not taking as long-term an approach as SAP.

Moving forward, Thompson said he expects to see the vendors focus on a few key verticals where organizations spend a lot on CRM projects and where there is no clear current winner. They include automotive, consumer goods, pharmaceuticals to some degree and high tech.

"For the next five years there will be outright battle to dominate," Thompson said. "And in the following five years, they'll give up, but we're a long way off from that."

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