Software as a service" is experiencing a rebirth. Despite the initial problems the first generation of application service providers (ASP), on-demand availability, appropriate pricing models, and other delivery approaches for enterprise applications are gaining new prominence. Small and medium companies in particular are looking for better alternatives to rigid user licenses, labor-intensive application maintenance, and the initial, large investment and time for return on investments to emerge. (For detailed information on "software as a service" see the Trends in Delivery and Pricing Models for Enterprise Applications series)
Responding to this demand, recent moves by the most prominent players in the software realm in late 2004 suggest that "software as a service" are here to stay. In particular
* SAP America, Inc and Hewlett-Packard (HP) introduced new managed solutions for medium companies at the end of 2004.
* PeopleSoft (now merged with Oracle Corporation) announced customers can outsource some or all of their support for PeopleSoft applications.
Part One of the Enterprise Apps Players Keep on Refining Their Value Propositions series
The SAP and HP Alliance
SAP America, Inc., the US subsidiary of the largest enterprise applications provider SAP AG (NYSE: SAP), and Hewlett-Packard (HP) (NYSE: HPQ; NASDAQ: HPQ), the information technology (IT) powerhouse, have long provided managed and hosted services for large enterprises. Their new vertical industry focus, "software as a service" solutions for medium companies, will supposedly help companies reduce the guesswork and expense of deploying sophisticated business management technology by providing software, services, and support. They will create a single point of contact at a total monthly cost for as low as $325 (USD) per user. The aggregate monthly cost assumes that software license, maintenance, and implementation fees are financed through the SAP Financing Program and that the remaining services are paid on a monthly basis.
SAP and HP recognize that many medium companies, while understanding the operational efficiencies and competitive advantages of deploying enterprise applications, often hesitate to implement them because of uncertainties about expenditures and the overall complexity and project scope. Hence, SAP and HP believe that managed industry solutions will eliminate these concerns by clearly defining the costs and resources necessary to run a complete, managed enterprise solution environment over time. Their solutions were devised to greatly simplify IT evaluation, adoption, and management, offering a breadth and depth of industry process management and strategic value that is typically unavailable from point, best-of-breed solutions. Supposedly their solutions will consolidate all components of the IT landscape within a predictable cost structure and provide the added convenience, safety, and efficiency of hosted delivery.
Through HP, SAP will initially target mid-market companies in oil and gas fuel distribution, consumer products/food, high-tech, and in the technical service industries. Additional industry solutions will be added over time. Equally important, knowing that successful hosting comes through true partnerships that reduce costs and improve efficiency for the client, SAP requires its partners create at least one vertically-oriented extension to the suite in order to become a mySAP All-in-One solution provider. SAP provides hosting expertise through a special operation quality service and solution portfolio to help partners drive innovation. So far this has been fruitful. Three of the four mySAP All-in-One industry flavors, slated to be released as hosted offerings, were written by partners. In return, both HP and SAP will compensate partners that sell the managed service: HP will offer a one-time referral fee, and SAP will pay a recurring revenue stream. SAP also pledges to support its partners to operate SAP solutions better, to drive the number of escalations down, to enable faster operation planning, and to share knowledge about best practices.
Along with its four hosted vertical solutions, SAP currently has twenty-nine channel partners that provide over forty-five mySAP All-in-One products in North America. The pre-packaged template products include real-time integrated applications software for supply chain operations, manufacturing, maintenance, financials, CRM and business intelligence (BI), etc. These aim to provide "best-in-suite" applications for mid-market prospects, which should be more appealing than a diverse "best-of-breed" approach. These managed solutions also include software and implementation services from SAP and its solution partners, as well as maintenance and end user training, support, functional management, and application management from SAP.
As the datacenter provider for the solutions, HP will offer a full range of services, including operations, infrastructure hosting, storage-on-demand, business recovery solutions, managed Web solutions, and security services that will enable ongoing process improvement and innovation. The solutions will leverage implementation and support services from SAP, HP, and their partners. A dedicated SAP customer service manager will be assigned to each customer, thereby reducing the risk and the required in-house resources at the customer site. Additionally, customers will hold the software licenses, enabling greater control and strategic value. They will also have an option to switch to an on-premise solution if necessary.
As for the SAP Hosting division, although SAP has noticed of the likes of salesforce.com, it is still not directly competing with them. The HP alliance does not provide a kind of a subscription service, but rather it is a lower entry point for cash strapped customers who can spread the software cost over a few years through SAP Financing programs. SAP Hosting is positioned to provide more complete SAP-centric solutions including operation, application, and infrastructure management. Accordingly, SAP will offer customers one-stop-shopping or selective outsourcing services focused on SAP. At the same time, it will support the license sales of SAP subsidiaries, reduce TCO, and strengthen operation quality. SAP claims a strong partner focus through interfaces with the partner community, a rich set of partner services, and by working with partners on a project level.
Responding to this demand, recent moves by the most prominent players in the software realm in late 2004 suggest that "software as a service" are here to stay. In particular
* SAP America, Inc and Hewlett-Packard (HP) introduced new managed solutions for medium companies at the end of 2004.
* PeopleSoft (now merged with Oracle Corporation) announced customers can outsource some or all of their support for PeopleSoft applications.
Part One of the Enterprise Apps Players Keep on Refining Their Value Propositions series
The SAP and HP Alliance
SAP America, Inc., the US subsidiary of the largest enterprise applications provider SAP AG (NYSE: SAP), and Hewlett-Packard (HP) (NYSE: HPQ; NASDAQ: HPQ), the information technology (IT) powerhouse, have long provided managed and hosted services for large enterprises. Their new vertical industry focus, "software as a service" solutions for medium companies, will supposedly help companies reduce the guesswork and expense of deploying sophisticated business management technology by providing software, services, and support. They will create a single point of contact at a total monthly cost for as low as $325 (USD) per user. The aggregate monthly cost assumes that software license, maintenance, and implementation fees are financed through the SAP Financing Program and that the remaining services are paid on a monthly basis.
SAP and HP recognize that many medium companies, while understanding the operational efficiencies and competitive advantages of deploying enterprise applications, often hesitate to implement them because of uncertainties about expenditures and the overall complexity and project scope. Hence, SAP and HP believe that managed industry solutions will eliminate these concerns by clearly defining the costs and resources necessary to run a complete, managed enterprise solution environment over time. Their solutions were devised to greatly simplify IT evaluation, adoption, and management, offering a breadth and depth of industry process management and strategic value that is typically unavailable from point, best-of-breed solutions. Supposedly their solutions will consolidate all components of the IT landscape within a predictable cost structure and provide the added convenience, safety, and efficiency of hosted delivery.
Through HP, SAP will initially target mid-market companies in oil and gas fuel distribution, consumer products/food, high-tech, and in the technical service industries. Additional industry solutions will be added over time. Equally important, knowing that successful hosting comes through true partnerships that reduce costs and improve efficiency for the client, SAP requires its partners create at least one vertically-oriented extension to the suite in order to become a mySAP All-in-One solution provider. SAP provides hosting expertise through a special operation quality service and solution portfolio to help partners drive innovation. So far this has been fruitful. Three of the four mySAP All-in-One industry flavors, slated to be released as hosted offerings, were written by partners. In return, both HP and SAP will compensate partners that sell the managed service: HP will offer a one-time referral fee, and SAP will pay a recurring revenue stream. SAP also pledges to support its partners to operate SAP solutions better, to drive the number of escalations down, to enable faster operation planning, and to share knowledge about best practices.
Along with its four hosted vertical solutions, SAP currently has twenty-nine channel partners that provide over forty-five mySAP All-in-One products in North America. The pre-packaged template products include real-time integrated applications software for supply chain operations, manufacturing, maintenance, financials, CRM and business intelligence (BI), etc. These aim to provide "best-in-suite" applications for mid-market prospects, which should be more appealing than a diverse "best-of-breed" approach. These managed solutions also include software and implementation services from SAP and its solution partners, as well as maintenance and end user training, support, functional management, and application management from SAP.
As the datacenter provider for the solutions, HP will offer a full range of services, including operations, infrastructure hosting, storage-on-demand, business recovery solutions, managed Web solutions, and security services that will enable ongoing process improvement and innovation. The solutions will leverage implementation and support services from SAP, HP, and their partners. A dedicated SAP customer service manager will be assigned to each customer, thereby reducing the risk and the required in-house resources at the customer site. Additionally, customers will hold the software licenses, enabling greater control and strategic value. They will also have an option to switch to an on-premise solution if necessary.
As for the SAP Hosting division, although SAP has noticed of the likes of salesforce.com, it is still not directly competing with them. The HP alliance does not provide a kind of a subscription service, but rather it is a lower entry point for cash strapped customers who can spread the software cost over a few years through SAP Financing programs. SAP Hosting is positioned to provide more complete SAP-centric solutions including operation, application, and infrastructure management. Accordingly, SAP will offer customers one-stop-shopping or selective outsourcing services focused on SAP. At the same time, it will support the license sales of SAP subsidiaries, reduce TCO, and strengthen operation quality. SAP claims a strong partner focus through interfaces with the partner community, a rich set of partner services, and by working with partners on a project level.
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