Trends Report

Hosted ERP Becoming A More Credible Option For Enterprises

January 26th, 2007
With contributors:
Liz Herbert , Francesca Bartolomey

Summary

With AT&T's acquisition of USinternetworking, industry consolidation among the major, early application service providers (ASPs) is nearly complete. Outsourcing suppliers have embraced the ASP approach because of: 1) the market potential of highly automated, repeatable packaged services that are less subject to labor-based competition, and 2) the providers' desire to expand into new markets. Hosted enterprise resource planning (ERP) applications remain of interest to a minority of enterprises, primarily mid-sized companies, startups, spin-offs, and units of very large companies, for which the hosted approach continues to be viable as a way to address new functional ERP software requirements and outsource existing functionality. But although the hosted ERP model will remain an attractive alternative, which business process and applications professionals will be able to evaluate with greater confidence in the wake of the recent industry consolidation, prospective buyers must consider important differences between software-as-a-service (SaaS), the ASP model, and custom hosted application outsourcing as well as how they differ from more traditional, on-site implementation and management.

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