SAP applications hosting: The more it changes, the more it stays the same

Hosted applications are back in fashion, and they will play a key role in the battle for mid-sized software customers.

Behind the recent announcement that SAP and Hewlett-Packard have begun offering hosted solutions for the mid-market...

is a story that reveals how good ideas go bad, go away – and later return with new energy.

Application hosting and outsourcing in the SAP market date back at least to 1998, when SAP announced a deal with AT&T. That was quickly followed by a similar partnership with EDS. Soon,: companies such as Plaut, Origin, and Applicast joined SAP in offering hosted applications. And man industry observers, myself included, predicted the trend would define the new ERP market.

Joshua Greenbaum

But most of those companies no longer exist, and others have nothing to do with SAP hosting. What went wrong? It's simple, really. The lies and other misdemeanors promulgated by several of those industry pioneers poisoned the well for any honest and legitimate offering. The companies who partnered early with SAP made promises they couldn't keep, and pledges they failed to hold up.

Those companies took what should have be a stolid, reliable, service-oriented business and tried to market it like something fantastical.

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.These fly-by-night companies went public before they had profits. They offered hosting for highly-customized environments they couldn't possibly support, and often tried to shoe-horn applications that were not designed to be hosted into a hosted model. The result was failure, bankruptcy, and a loss of credibility for what should have been a great idea.

Amid all that, only one company truly stayed the course: Oracle Corp. The result is that Oracle now hast the hosted software business that its competitors must beat.

This competition is about to get stiffer: the small and mid-sized market will be the biggest battleground for ERP vendors for the next few years, and hosting services will be a major differentiator for SAP and others.

How efficiently and favorably SAP can offer hosted applications to the mid-sized market will be a major factor in determining whether it can steal market share from Oracle, Microsoft, SSA Global, Mapics, and all the rest. So keep close watch on SAP hosted application partnerships. This is going to be a fight worth watching.

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