ASP trend counters software consolidation

More and more enterprises purchasing application services built for smaller companies

It may fly in the face of current IT wisdom, but some departments within larger enterprises are turning away from centralized solutions and are buying their own on-demand and on-premises packaged applications.

Although most CIOs say companies need to consolidate their various supported enterprise applications, they are merely expressing what they would like to see happen, not what is actually happening, said Craig Downing, vice president and general manager for AccPac, a packaged ERP solution, at Sage Software, formerly Best Software.

Downing’s customers include New Zealand Milk — one of the largest dairy producers in the world — Exxon Mobil, and a certain retailer in Arkansas that asked not to be named.

“Enterprise businesses still run on Excel and Access,” Downing said. “All of a sudden it seems like a good idea to consolidate, to recreate that little action that Excel solved in SAP. But that can become a six-digit project.”

Sometimes local divisions are pre-approved to go their own way with smaller solutions. New Zealand Milk, for example, is standardized on SAP but management tells its far-flung sites that they may use a solution from J.D. Edwards if SAP proves too much to handle. And if the J.D. Edwards solution still doesn’t meet the needs of the divisions, management recommends that they use off-the-shelf ERP from Sage Software.

When Intacct, an ERP ASP targeting the SMB (server message block) market, released the latest version of its solution last week, no one would have suspected that DHI, the U.S. subsidiary of Dutch-owned DHI Water and Environment, would be using it on demand for its ERP system.

“Every subsidiary is on its own,” said Brian Hassett, account administrator, at DHI. “There is no global accounting system.”

The 15 different financial accounting systems are eventually condensed and rolled into one financial, Hassett added.

Sometimes, however, individual departments or divisions within countries hindered by centralized decision making don’t wait for corporate approval. Such was the case at a European telco that went through a quiet revolt within its individual companies rather than wait two years for delivery of the corporate standard, said Phillip Robinson, senior vice president of marketing at applications host salesforce.com.

“These divisions decided to take destiny into their own hands,” Robinson said.

The on-demand solution makes such a move simpler because a company doesn’t need to make as large a capital investment in hardware, database, and systems management as it would if it had a client/server application.

Josh Greenbaum, lead analyst at Enterprise Applications Consulting, said that the big vendors like SAP and Oracle are pushing a comprehensive upgrade process.

“IT was there when the last upgrade happened in the ’90s, and that wasn’t much fun,” Greenbaum explained.

He calls the phenomenon “pockets of resistance.”

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