SAP Launches ERP Hosting Company

FRAMINGHAM (03/02/2000) - After initially leaving application hosting to outsourcing and services firms, SAP AG now plans to join other enterprise resource planning (ERP) vendors by jumping directly into the hosting business.

At the CeBit trade show in Hannover, Germany, SAP said it's setting up a new company that will rent R/3 and its other business applications to users for monthly fees. That matches moves made by ERP rivals Oracle Corp. and PeopleSoft Inc.

Oracle began offering hosting services for its ERP applications last year.

PeopleSoft, in Pleasanton, Calif., this week plans to announce a hosting program that it first said was in the works six months ago.

SAP's new hosting company, which has yet to be named, will operate independently of the German vendor's subsidiaries in the U.S. and other countries and be responsible for hosting-related activities from those units.

It's due to open for business next month with about 50 employees.

But SAP doesn't plan to go its own way on hosting. Hartmut Engel, who will head the new company, said SAP wants to claim only about 10% of the R/3 hosting market for its applications. The rest will be left to outsourcing companies and application service providers that his unit will train and certify, Engel said.

For R/3 users who want someone to run their applications for them, SAP's foray into hosting provides the opportunity to do business with a single company, said Joshua Greenbaum, an analyst at Enterprise Applications Consulting in Berkeley, Calif.

But that can also be a two-edged sword because independent hosting firms can act as user advocates with SAP if problems arise, according to Greenbaum. And users with multiple applications may not have any choice. "SAP is not going to support an Oracle environment, period," he said.

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