SAP is to announce a new on-demand model for its CRM (customer relationship management) software, after years avoiding such a move.

Officials declined to discuss the planned announcement in detail ahead of the event, scheduled for this Thursday in California.

The company's move to provide an CRM-on-demand product comes as companies such as Salesforce.com and NetSuite have steadily attracted customers to their on-line offerings, putting SAP under competitive pressure.

SAP has been reluctant to provide a hosted CRM-on-demand service largely to avoid cannibalising business with customers who have acquired a license to install and run its software on their own computers.

CEO Henning Kagermann has also argued that the new service would require investments in hardware and data centers, and wasn't seen as a high-margin business.

Asked specifically in a 2004 interview about a CRM-on-demand product to counter Salesforce's offering, Kagermann said a move in that direction would require SAP to build up a new line of business. "To be honest, we have higher priorities," he said.

On Thursday, CRM-on-demand will have officially climbed a notch higher on SAP's priority list. Amazing what a little competition can do.