New start-up sees ASP niche in ERP
- 08 November, 2004 07:30
Newly formed application service provider, Pro Initiative, has inked a distribution agreement with SSA Global in a bid to tap into the hosted ERP services market.
The company will distribute the vendor's enterprise software products through a traditional software licensing structure, or as part of a business process outsourcing (BPO) service.
Pro Initiative principal consultant, Paul Cockley, said it had taken the company almost a year to sign off on the deal. "Global software vendors have been loathe to move into the ASP market for fear of eroding their client base," he said. "It basically came down to a risk exposure for SSA - the potential litigation risk if something was to happen."
Knowing this, Cockley said he decided to establish the Pro Initiative business to provide the outsourced services in partnership with SSA.
Pro Initiative will offer tier-one applications including ERP LN (previously Baan) for the SMB market, FM2.0 for larger organisations and SSA eCommerce B2B, which offers BPO capabilities for extending SAP and JD Edwards applications.
Cockley said offering the solutions on a hosted basis would allow customers to access tier one applications without the upfront capital outlay traditionally required.
The ASP would target mid-market manufacturers who cannot afford the large million dollar plus ERP installation but require the functionality, he added.
"With tier-one ERP applications you can load it once and off that one installation you can have 100 different companies running independently," Cockley said.
Initially services will be run in-house, but a hosted data centre service is being finalised with Kaz Computers, he said.
To supplement its deal with SSA, Pro Initiative has also developed a reseller strategy, targeting information service providers (ISPs) and tier-two accounting service companies.
Resellers received a percentage of the service sold and could value add through network configuration and training services, Cockley said.
Pro Initiative's decision to tap into the hosted software applications market follows news that global software vendor, SAP, will also establish an ERP hosting service in partnership with HP globally. The new offering will incorporate applications, maintenance, services and support and be available for a monthly fee.
Industry analysts claim the renewed market interest in the ASP model is particularly targeted at the small medium enterprise (SME) sector. IDC analyst, Aprajita Sharma, said a key feature of recent uptake was the more granular approach offered.
"In the 1980s people made large investments in IT - they went and bought SAP modules and the problem that they faced was under capacity," she said.
"They have not used the packages to their full capacity but they are still paying for the maintenance. That's the reason companies have started proposing the pay as you go model."