Companies report growing demand for hosted e-biz apps

Although the sagging economy has taken a harsh toll on some e-business vendors, some traditional ERP (enterprise resource planning) vendors have found that the hosted e-business application market is growing.

The impetus appears to be that users are moving to lower-cost options as opposed to managing and maintaining their own software.

Oracle Corp. is scheduled to announce Wednesday increasing market momentum in its E-Business Suite online, with 90 percent of its online e-business customers renewing their subscriptions, according to company officials.

Joe King, vice president of, said the company's online offerings have been boosted by Oracle's recent expansion of its sales and support teams outside of North America into Asia and Latin America. In addition, the ailing economy has prompted companies to move to squeeze the most value from their investments, King said.

"Customers are being prudent and looking at how can they get the most for their dollar," King said.

"A high percentage of those customers are also continually adding components of the suite as they are renewing. They want reliability, predictability, and they want their business processes covered by the best set of applications. It gives the customer the ability to automate their process rather than acquire point solutions and pay someone to make them work," King said.

For example, the Washington-based hops producer, John I. Haas, went live on hosted modules from Oracle E-Business Suite in June. The company is running Oracle financials, order management, processing manufacturing, procuremen, and manufacturing intelligence applications.

The primary factor in the company's decision to use hosted versions of the software was cost, said Kyle Lambert, vice president of information solutions at Haas.

"It was actually a 20 percent cut in our Oracle application costs," Lambert said. The company has saved in database administration costs, consulting costs, and software maintenance agreements, Lambert said. In addition, the company has bumped up employee productivity by allowing employees to focus on core job requirements and not the applications, he added.

The move was especially beneficial to the 20 percent of the company's employees who work remotely and the 10 percent who are regular "road warriors," Lambert said. Access for remote workers, many who have low bandwidth, has been eased by the move to hosted applications. In addition, road warriors can more easily access data from the road.

Joe Marino, an analyst at Current Analysis, based in Sterling Va., said it is difficult to ascertain which companies are gaining the most market share in the hosted e-business applications arena. But he said that ERP companies have staying power because of revenue from other applications compared to the limited potential of competitors' point solutions.

Oracle's e-business online services are attractive to enterprise users because they offer a solutions set, and the company focuses its deployment on a best practices methodology geared toward a quick time to market, Marino said.

"They are engineering solution sets and not turning things into professional services," Marino said. "SAP has a coordinated strategy with Commerce One, but I don't know to what extent you can say it has its own applications set."

For Empirix, a Waltham, Mass.-based company that provides products to ensure the performance and reliability of Web and voice applications, deployed Oracle's financials, order management, inventory, and purchasing applications as hosted applications. This implementation meant that the company could go live with the applications in 87 days and save US$200,000 in initial deployment costs, said Brenda Boyle, senior project manager at Empirix.

"We had our apps up and running before we even had people to run the projects," Boyle said. "We bought 40 days of a DBA [database administrator] service so we didn't have to hire a DBA. We could schedule things over the phone ... and he would give us service as we needed it. If he wasn't working on our account, then we didn't have to pay."

In addition, the company can afford to add new applications even during the sagging economy because of the savings in deployment and maintenance costs, Boyle said.

"We pay a new hosting fee ... we don't have to hire a new DBA," Boyle said "We don't have to train somebody on the database. We don't have to train somebody on the new apps. With the economy turned down ... when we want to add the cool stuff with the bells and whistles we can do that any time."

PeopleSoft, based in Pleasanton, California, also is seeing a surge in demand for its hosted e-business offerings as customers realize the potential ROI (return on investment) for hosted options, said Sanjay Katyal, senior director of PeopleSoft's eCenter. High-visibility Fortune 1000 and Fortune 50 companies have replaced the company's initial base of dot-com customers, Katyal said. PeopleSoft has seen growth in all its hosted e-business applications, he said.

"The key decision criteria become broader. It's not just cost and cost alone," Katyal said. "It's more predictable costs ... [customers are asking] 'Can you do the entire suite, and can you support me from an upgrade standpoint globally?' The real bang for the buck in making a hosting decision really comes from ... the cost avoidance, the savings on the technology and associated services that you realize by going with hosting."

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