Vendors are jumping on the leasing bandwagon with offers of enterprise resource planning (ERP) applications. This new style of service, which bears a striking similarity to the bureau and time-sharing options of old, looks set to appear on the Australian scene within months.
The question is whether this is a wave Australian users will catch, or duck under. Vendors are forging ahead with the services, punting that users of ERP software will jump to the leasing plans as quickly as they have embraced other ERP outsourcing options.
Under the new rental proposals, users wouldn't buy software licences up front. Instead, they would pay a flat monthly fee for Internet access to applications, housed and maintained off-site, on vendor-owned computers.
The rental programs, aimed at mid-market organisations, are supposed to eliminate long, complex implementations and cut high software maintenance costs. Though estimates are hard to come by, the rental approach is expected to at least make costs more predictable and guarantee service levels. It would also reduce companies' need for costly and hard-to-retain in-house IT talent.
JD Edwards has teamed up with IBM in the US to offer an applications rental service to customers via dedicated links.
"Our guys in Denver call it the revenge of time share," said Wendy Stubbs, general manager of marketing at JD Edwards Australia and New Zealand (JDE ANZ).
Stubbs said that JDE ANZ would research the regional market before deciding whether to launch an ERP rental service in Australia and New Zealand.
Glenn Tubb, managing director, JDE ANZ, revealed that the company, in conjunction with IBM, already houses and runs an ERP system for one customer in Australia, which the client accesses over a network.
That customer is well known Papua New Guinean trader Collins and Leahy (C&L).
In a contract worth $3 million over five years, signed three years ago, C&L has bought software, hardware and services from JDE ANZ and IBM.
Tubb said C&L has 200 users spread throughout remote sites in PNG, where the company operates more than 40 stores in 11 provinces, selling a range of goods including farming supplies and foodstuffs.
According to Tubb, C&L found it would be easier and more cost-effective to get JDE to house and maintain the application in Sydney, making it available to C&L staff over a network, than to operate the system in-house in PNG.
Tubb said that the leasing service was an option for customers who did not have time to overhaul their systems before 2000.
"If we don't launch this as a service in Australia by the first quarter of 1999 we'll miss the window of opportunity on Y2K," he saidAnalysts, however, are cautious in their interpretations of the new ERP leasing service.
"In a nutshell, it's a brilliant idea. But it is way ahead of its time," said Bruce Richardson, an analyst at AMR.