IT managers turn to software hosting

The maturing software application hosting market is becoming an increasingly attractive option for many IT managers looking to outsource complex maintenance issues, according to market watchers.

Last week, IT services giant EDS unveiled its managed desktop offering, while other software vendors, such as Oracle and Salesforce.com, continue to push their hosted applications.

Companies are being attracted by the promise of reducing their reliance on routine software maintenance, freeing skilled IT staff to concentrate on more business-critical issues, said Philip Carnelley, software research director at analyst firm Ovum.

"Initial application service providers (ASPs) rented access to software, but that never really took off. The difference now is that firms are promising application management," he said.

EDS has devised a scheme, called myCOE, which will provide users with pay-as-you-use access to Microsoft's desktop software. Customers will pay for desktop applications on a subscription basis, while charges for such things as data storage and help desk services will be based on usage.

"The primary aim behind myCOE is to work with our clients to reduce their fixed costs," said Carol Wyatt, global offering executive for EDS.

Meanwhile, companies such as Oracle and Salesforce.com have been growing their hosted applications customer base.

Oracle now boasts over 130 European customers for its Oracle Outsourcing service, with a significant number of these, such as retailer Matalan, in the UK.

"It's a different sort of market than it was a few years ago. The complexity is in managing applications, and that's what customers are interested in," said Robert Fleming, senior director of Oracle outsourcing marketing.

Oracle expects to grow its hosted e-business, database and application server software to generate $1bn in additional annual services revenue by 2006.