Middle-tier ERP vendor JD Edwards has abandoned the ASP (application service provider) hosting business, presaging a massive shakeout in the industry.
"JD Edwards will be one of many vendors wising up to the fact that the ASP phenomenon is not all things to all people," Bruce McCabe, research director at Gartner, said.
McCabe said the industry, which has seen incredible hype with very few customer case stories, will see some "massive consolidation" in the coming years.
According to Edward McVaney, CEO, president and chairman of the ERP (enterprise resource planning) vendor, the sudden exit stemmed from a desire to get back to basics. The move is also a backward step amongst the ERP vendor's peers, SAP, Oracle and PeopleSoft, which all rent out their software over the Internet.
However, "that's not our business; not our cup of tea", McVaney said, echoing McCabe's assertion that individual software vendors will need to partner to position themselves in the ASP scene. Instead, JD Edwards prefers to offer business-to-business customers "sophisticated shared processes in a highly collaborative mode", McVaney said. While not mentioning specific application areas, McVaney said he believes that the company has "a unique opportunity in the collaborative commerce market".
The move also follows a survey which revealed only 17 per cent of companies are currently using ASP services, another 24 per cent plan to, and 59 per cent have no plans to adopt the application outsourcing model.
The survey, conducted by Enterprise Management Associates of 280 Network World US readers, also indicated more than one third of the companies that envision moving to ASP services will wait 12 to 18 months before making any move.
Alliances with major players such as Siebel Systems and Ariba are going to stick, according to McVaney. These arrangements will fit in well with JD Edwards' view that "e-business will be heterogeneous", McVaney said. "We want to allow customers to implement their ideas as rapidly as possible."
In another dramatic move, JD Edwards also announced it will cut its global workforce by 800. The layoff, which will hit its operations in Germany and Japan hardest, is an effort by JD Edwards to get its costs in line with its revenues, McVaney said.
The goal is for JD Edwards to become "more nimble and responsive to market changes", he said.