Hosted SAP service targets midmarket

Von Marc L.

SAP AG is rolling out a hosted service it hopes will appeal to midsize customers that can rent the software for as little as US$325 per user per month while avoiding the complexity of in-house installations.

SAP Wednesday unveiled the managed offering, which officials said delivers prepackaged bundles of software aimed at specific vertical markets such as consumer goods and high-tech device manufacturers. The program calls for using server and storage hardware in the data centers of SAP partner Hewlett-Packard Co., which will also provide security and other technical support and services.

Previously, SAP primarily offered hosted applications only to very large companies with specific requirements that were consistent with their scale, said Bill McDermott, CEO and president of SAP America Inc.

Under the new plan, each customer gets a dedicated server in an HP data center. "A lot of customers in small- to medium-size businesses told me they don"t like the one-to-many (hosting) model where their data is managed in an open environment," McDermott said. "They want a one-to-one relationship."

Gary Walden, SAP project manager at refiner C&H Sugar Co Inc., said that if a single monthly pricing scheme had been available a year ago when his company was negotiating with SAP for a hosted service, "we would have looked at it very hard" as a way to save money. C&H, based in Crockett, Calif., has used a full suite of hosted SAP applications since March, after it shut down a mainframe-based system.

The C&H hosted systems contract separately priced out implementation and consulting fees, among other things, Walden said. Nevertheless, the hosting service has helped boost C&H"s operational efficiency without having to add extra IT support staff around the clock.

On the other hand, for a large company like Halliburton Co. in Houston, the new SAP offering sparks no interest at all, said IT Vice President Mike Perroni. The energy and construction services provider currently runs SAP R/3 hosted by an HP data center and technical staff.

"We fall into the large market," he said. "We only have one instance of SAP, and it"s big."

While SAP is hardly alone among application providers in hosting, Amy Konary, an analyst at Framingham, Mass.-based IDC, said the company separates itself from the pack by bundling the applications to service specific industries. Most likely, the managed offering will appeal to large SAP shops interested in extending the software to subsidiaries or regional offices, she said.