SAP Could Lose More Share in the CRM Software Market

-20.98%
Downside
195
Market
154
Trefis
SAP: SAP logo
SAP
SAP

SAP (NYSE:SAP) leads the $10 billion customer relationship management (CRM) software market with share of around 22%.  We expect SAP competitors Microsoft (NASDAQ:MSFT), Salesforce.com (NYSE:CRM) and Oracle (NASDAQ:ORCL) to gain share at SAP’s expense.

Below we explain what CRM software is and its significance to SAP, and why SAP could lose market share in the future.

CRM Software 15% of SAP’s Stock

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The CRM software helps companies better serve their customers by tracking customer information and leveraging customer data to gain business insights.  We estimate the CRM software to constitute 15% of $50 Trefis price estimate for SAP’s stock.

SAP Losing Share to Oracle, Microsoft and Salesforce.com

We expect SAP’s share in the CRM market to decline from 22% in 2009 to about 19% by the end of the Trefis forecast period.

During the same period, we expect Oracle to gain market share from 16% to 17%, Salesforce.com to gain share from 11% to around 15%, and Microsoft to gain share from 7% to around 10%.

Below are the two factors that are likely to result in SAP losing share:

1. Delay in SAP’s SaaS Implementation

SAP has been slow in implementing its Software-as-a-Service (SaaS) software Business ByDesign.  It now expects to launch the software by mid-2011 instead of its earlier guidance of 2010 with a target of reaching $1 billion in revenue and customer base of 10,000.

While SAP has delayed its SaaS implementation, competitors Salesforce.com and Microsoft have increased their SaaS offerings giving them a head start over SAP.

We believe that SAP will need to work on its SaaS solution aggressively to stop future share declines in CRM market.

2. Oracle Increasingly Benefiting from Siebel

Oracle, which acquired Siebel in 2006 for its CRM offerings, could not immediately benefit from the acquisition due to procedural delays in integrating the companies’ operations.  We believe that Oracle is now in a position to start benefiting from the Siebel acquisition and its CRM market share will continue to improve.

You can modify our forecasts above to see how SAP’s stock will be impacted if its CRM market share were to stabilize rather than decline as we forecast.

You can see our complete model for SAP’s stock here.