Construction firm O'Donnell and Hanlon has dumped its on-premise Enterprise Resource Planning (ERP) system for a hosted model to increase application availability and security.

The company, headquartered in regional NSW, builds and renovates buildings in the health, education, residential and commercial sectors, and has four sites across the state.

The company chose JobPac ERP as an outsourced service model from Sydney-based data hosting firm Virtual.Offis under a three-year agreement.

JobPac is a ERP system design specifically for the engineering and construction industries and holds about 70 percent of niche market share, with customers including Mirvac, LU Simon Builders and Total Construction.

Virtual.Offis CEO, Craig Allen, said the hosted solution, which was until recently only offered as an on-premise application, will attract customers which do not want to invest in on-site ERP management.

"You get more bang for your buck out of a hosted model, compared to on-premise applications," Allen said.

"IT is typically seen as a capital cost where budgets blow out and in-house software may require consultants on a temporary or permanent basis.

"This raises too many inconsistencies, and dedicated security staff can be an expensive risk for smaller businesses."

Allen said JobPac runs on an IBM System I server which is just unrealistic for smaller enterprises to deploy.

"We have turned a $250,000 investment into a $150 per seat model," he said.

According to IBRS senior research analyst, Kevin McIsaac, the drawcard for hosted services isn't money or convenience.

He said benefits are easier to see in commodity applications rather than CRM or ERP systems, which must have strong contracts with trust and economies of scale.

"I doubt that cost savings is the key behind outsourcing, the choice comes down to whether you want to build the IT into your organization or not," McIsaac said.

"Many people thought they were outsourcing to save money, which is the most visible option, but that doesn't always happen."

He said better security can also be an illusion, depending on the contract SLAs, and the experience of hosting staff.