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SAP readies another Web hosting initiative, with Corio

The planned partnership with the application service provider follows SAP's announcement that it is forming a new company to host its high-end business software applications.

SAP next month intends to announce a partnership with application service provider Corio, according to people familiar with the two companies' plans.

The move would follow yesterday's announcement that SAP is forming a new company to host its high-end business software applications. It's also interesting because Corio has close ties to SAP rival PeopleSoft.

SAP's hosting strategy appears to be developing along two tracks: The giant will simultaneously run its own hosting business and partner with so-called application service providers, or ASPs. But as the company's plans gather momentum, the nascent industry is luring more and more entrants, from hardware makers Gateway and Dell to chip giant Intel to more traditional services firms such as EDS.

Analysts say it is unclear how SAP will manage both to cooperate with and compete against its ASP partners while running its own business.

ASPs provide remote access to business-use software, typically for the price of a monthly subscription fee. Corio, like its main rival, USinternetworking, offers its customers a choice among several different companies. ASPs maintain that customers can save 70 percent in up-front costs by renting all software applications rather than buying them.

SAP, which makes software that automates such functions as financial or manufacturing management, hopes to nab new business from companies that might otherwise not want to buy, install and manage the sophisticated software themselves.

Under the Corio agreement, SAP will license its software to customers while Corio will collect monthly hosting fees, according to people familiar with the deal. As an example, SAP would build a Web store for a customer and connect it to SAP's "back-office" software, enabling a business to sell on its Web site and track the manufacturing cycle on the same hosted system.

The still-unnamed service is expected to be announced within the next several weeks, these people said.

SAP has already partnered with smaller hosting providers, such as eOnline and Applicast. On the high end, SAP partners with systems integrator EDS.

Meanwhile, SAP rivals PeopleSoft, Oracle and J.D. Edwards are all adding new hosting services for customers. PeopleSoft has made an equity investment in Corio, which mainly hosts PeopleSoft's human resources applications, and also plans to launch its own ASP division. Oracle recently launched Business OnLine and has, to date, hosted mostly financial applications for several dozen customers.