Rent an app and relax

Leasing software from an applications service provider might be a comfortable fit for companies looking to save time and money implementing mission-critical apps. But don't get too cozy. This new model still has a few bed bugs.


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AT A GLANCE: Sunburst Hospitality Corp.
Who's Hosting What?
Chuck Warczak, VP of finance and systems at Sunburst Hospitality Corp., cheerfully avoids the implementation insomnia he experienced in the past.

Photo: Martin Simon/SABA
Chuck Warczak is no stranger to the sleepless nights that accompany an ERP rollout. At Choice Hotels International, of Silver Springs, Md., Warczak's group watched the hotel chain wrestle with the standard implementation nightmares-- everything from the performance and configuration glitches associated with getting PeopleSoft Inc. applications up and running to the problems connected with retaining qualified IT staffers to support them.

AT A GLANCE: Sunburst Hospitality Corp.
The company: A $200-million franchise hotel chain, Sunburst Hospitality Corp., in Silver Springs, Md., is spinoff of Choice Hotels International.

The problem: How to implement the PeopleSoft ERP suite while avoiding the headaches that Choice experienced during its implementation.

The solution: Sunburst opted to lease the PeopleSoft suite from Usinternetworking Inc., of Annapolis, Md., letting the vendor host and run the software for a monthly, per-user fee. As a result, Sunburst got the ERP suite up and running in 90 days; within a couple of months, the company's monthly financial close was back on schedule.

After Choice Hotels spun off Sunburst Hospitality Corp. in 1997 and Warczak became vice president of finance and systems for the new company, he vowed to find a more accommodating solution for a deployment of PeopleSoft's ERP suite.

Sunburst Hospitality, along with a handful of other companies, is hoping to catch that break by working with application service providers (ASPs), an emerging class of players offering companies the option of renting applications run off-site at the hosting provider's data center that are accessible via dedicated leased lines or over the Internet through a browser. The monthly fee, which varies depending on the specific requirements of the installation and the number of users, covers the hardware, software, and network infrastructure to run the systems along with the personnel and consulting support for management, configuration, and maintenance.

ERP applications currently make up the bulk of the ASP offerings, although there are datamarts, electronic commerce, customer relationship management, salesforce automation, desktop productivity, human resource, supply chain, and specialized vertical applications coming to market, with new entrants being announced on a regular basis (see "Who's hosting what").

Where ASP fits in

The players and the applications they host.

This list is not comprehensive.

BizTone Com.
BizTone Financials

Corio Inc.

Electronic Data Systems Corp.
SAP AG's R/3

FutureLink Distribution Corp.

Great Plains Software Inc.'s accounting package
Onyx Software Inc.'s Customer Center
Applix Inc.'s Anyware Office desktop productivity software
Applications for the oil and gas industry

IBM Global Services, a division of IBM Corp.

J.D. Edwards & Co.'s One World
Great Plains Software's accounting package

Oracle Corp.'s Business OnLine
All Oracle applications

Usinternetworking Inc.

For small to mid-size companies like $200 million Sunburst Hospitality, the ASP model can be a way to get Ritz-Carlton-like software quality and service at Holiday Inn prices. Warczak estimates that it would cost his company $1 million to $2 million up front to implement the software directly with PeopleSoft. By contrast, with an ASP implementation, up-front payments are minimal and software costs are about $500 to $600 per month per user according to Warczak. The Sunburst implementation went live in April with about 25 users.

ASP deals--which typically span three to five years and cost anywhere from a couple of hundred dollars a month per user up to $1,000--are often significantly less expensive than creating the technology infrastructure and hiring the IT talent to run the systems internally. Along with a reduced initial investment, companies can leave their IT work to someone else, freeing them to concentrate on core competencies. Finally, handing off the implementation and operations to a highly skilled third party is also a way to get complex software into production much more quickly and with the potential for easy scalability.

"The proposition for users is you don't have to build your own computing any more; it's delivered to you out of the wall the same way as the telephone and electricity come to you," says Phil Wainewright, editor and founder of ASP News Review , a specialty newsletter and Web site based in London, which covers this emerging area. "The ASPs are saying, 'we'll take care of all that hassle ... for a fixed, predictable, monthly fee.'"

But there's no proof that the ASP model will be as hassle-free as promised. Most vendors are just unveiling their offerings, and early users are only now starting to move out of the pilot stage and go live with hosted applications. That means there are still questions about performance, system availability, and security, as well as uncertainty over the long-term viability of some of the ASP players, many of which are startups.

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