Notwithstanding a downturn in the global economy, enterprise technology major SAP Labs has seen a robust growth in the customer relationship management (CRM) market. While the rest of the enterprise market had gone down 6-10% during the last 18 months, the CRM market is said to have actually grown between 2-3%, according to Vinay Iyer, SAP vice-president for global solution marketing. ?In the agenda of most CEOs, the bigger focus is how do we better understand the customer and deliver what they need,? he says. Perhaps, this broad realisation is causing the CRM market to defy the slowdown and expand. Iyer is gung ho on the fact that slowdown in the marketplace has stopped and a recovery is in sight by mid-2010. SAP, which has its second largest global R&D centre and its third largest manpower base in India, expects growth in the banking and retail markets here. ?A significant part of these employees work on the CRM product. If you look at it from a global investment perspective, I would say that SAP is making more investment in CRM than any other CRM vendor,? Iyer tells Reema Jose in an interaction. Excerpts:

How has the market downturn impacted the CRM market for SAP?

In the CRM market, everybody expected that things will go slow, but surprisingly the CRM market is something that grew despite the economy. The CRM market is said to have actually grown between 2% and 3% in the last 18 months, whereas the rest of the enterprise market had gone down 6-10%. Of all the enterprise software market spaces, CRM was one of the two areas, the other area being business analytics that actually grew robustly.

Since we released the new SAP CRM package in December 2007, we have seen more adoption of the new products. These are SAP CRM 2007 and the recent product SAP CRM 7.0, than the previous releases of SAP CRM. So when we look at both our own experience and the market trend, CRM is definitely on the way up.

Frankly, we didn?t expect this. But there are two trends: one is the democratisation of information because of the internet mobility and the ability for customers to get together in communities and form opinions about brands, products and experiences. In essence, there?s been a significant shift in the power away from vendors to customers. So today, understanding the customer is all the more critical than anytime in mankind?s history. And so in the agenda of most CEOs, the bigger focus is how do we better understand the customer and deliver what they need.

The whole nature of social media and enterprise mobility is empowering the consumer. Also, there is a broad realisation that differentiation will come only from understanding the customer deeply. This is what has caused the CRM market to expand despite the continuing troubles in the economy. If we look at the level of activity among SAP customers in India, it is really very robust.

Have you been able to penetrate the Indian small and medium enterprises (SME) market? What is your strategy to address this market?

In the Indian market in particular, I would argue that it is all the more important for SMEs to embrace technology to get closer to their customers. They have to achieve scale without having the resources of a large multinational entity. The opportunity for SMEs is that the knowledge about the customer can be accessed. If you want to understand anything about a particular customer segment, you can be present in the relevant online community and understand what people are talking about.

From an SME customer base, I would say that a better return on investments would be achieved by having customer-focused initiatives. So within the Indian market, we are continuing to see adoption for CRM by our established large customers and we are seeing good activity with SMBs.

What kind of changes have you seen in the Indian customer?s requirements during the downturn?

Up until the middle of last year, customers were eager to purchase big software, buy the whole enterprise and implement it. They were not too worried about short term return on investments. But clearly, there has been a big shift in purchasing behaviour towards more modular applications. So customers are prioritising between investments. And companies are focused on critical things like sales forecasts. So putting a sales force automation tool has been a big focus. Even within SAP, sales force automaton deployment rates have clearly grown much rapidly.

Another key thing to retain customers in a downturn is by providing superior customer support while lowering costs and driving efficiencies. Customer support has been the second biggest area of growth and you could call marketing the third.

Have you seen a recovery in technology spending yet?

The slowdown of spending has definitely stopped. I could say that we were continually going down, especially when you look at the third quarter. The market in general has stopped declining. Our expectation is that once companies start to think positive and may be in the second half of 2010, we are going to experience an expansion. If I am forward thinking, I am going to prepare for that expansion by hiring people and putting processes in place. We hope that at least in the second half of 2010, things will begin to improve.

In which verticals do you expect to see growth in India?

India is a strategic market and one of the key markets for growth and R&D. In India, we see aggressive growth in professional services and in companies setting up big CRM systems. Companies understand the pressure on margins and want to improve the utilisation of employees and have them do productive work as opposed to administrative work. We are seeing big growth in retail, because now it is all about identifying customers and marketing and coming up with the right promotions and offers. We are seeing strong growth in telecom. There is good interest in the banking and insurance sector as well. Traditionally, we have had a strong presence in industrial manufacturing. Banking is an emerging sector and retail is a growing sector for us.

But you have competition in India, from home-grown and MNC firms. How will you score over them?

Within the SAP suite, CRM is one of the top five areas of investment. India has the third largest number of SAP employees based here and a significant number of these employees work on the CRM product. We have dedicated people in product management based in India, listening to the customers? market requirements and feeding it back into the product so that we come up with relevant things. If you look at it from a global investment perspective, I would say that SAP is making more investment in CRM than any other competing vendor. We are investing more in core technology, applications like mobility, social media and communications. We are building more industry applications focused on industries like consumer products, retail, banking and utilities.

What will be the next wave of technology outsourcing? How will your India presence contribute to SAP?s upcoming products?

There are major things going on like the pervasive use of the smartphone.

In countries like India, bringing CRM to the users through smartphones is a very big market change. Through partnerships, we are bringing these applications to the market. Another big thing is social media and how do you bring social media into CRM.

We have a CMO community that meets every six months and the number one topic of discussion for them is: what do we do with social media and how much do we invest in it? Figuring out how to leverage the opportunity of social media is what we are pursuing.

A big chunk of CRM development is happening in India and a lot of new technologies, especially the ones around social media are actually getting done in India.