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SAP offers hosted applications, online marketplace

The German business software maker says it is forming a new company intended to provide application hosting for businesses, as well as a new marketplace for its customer base.

The hosted applications market just got a little more crowded.

German business software maker SAP today said it is forming a new company intended to provide application hosting for businesses. The company also launched a new marketplace for its customer base called mySAP.com Marketplace for the SAP Community.

The focus of the new company will be to offer application service provider (ASP) services from SAP and to support ASP and hosting partners, the company said.

"We think this is the demand of the market for the future," said Hartmut Engel, head of the newly formed ASP company. "(Customers want) to get everything from a one-stop shop, from one partner."

Engel said the company is currently in negotiations with large hardware vendors and Web hosting firms to partner on some of its hosting services, such as data center operations and PC and desktop maintenance.

The move is a further illustration of SAP's shift to the Net and away from the enterprise resource planning market, which has had lagging sales over the last few years. SAP joins competitor Oracle in the growing ASP space, as enterprise resource planning companies, faced with plummeting financial results, struggle to reinvent themselves. These firms have shifted research and development efforts to the Internet, announcing intentions to release Web-friendly applications and hosted services.

Dave Boulanger, an analyst at Boston-based AMR Research, questioned whether SAP made a smart move by forming their own ASP company when they already have several successful ASP partnerships in place.

"They already had partnerships with app hosting companies," said Boulanger. "That model was working."

He added, "This hosting announcement is going to divert them from their real job, which is to produce software that they have been promising customers for some time."

SAP, which shipped parts of its customer relationship management (CRM) software in mid-December, is scheduled to ship other key software products this year, including e-procurement used for buying and selling goods over the Internet and supply chain management, which automates a company's inventory and warehousing needs.

"They can do an okay job (with their new ASP company), but my only fear is if SAP doesn?t deliver on all the product commitments they made this year, their customer base is going to go from acceptance to disbelief," said Boulanger.

SAP's new company, which has yet to be named, will open for business April 1 with 50 employees, the company said. It will target its services to small and medium-size companies. Beyond its own ASP and hosting services, the new company will provide training and support to its ASP partners, the company said.

"With a dedicated and sharply focused company, SAP will gain valuable, hands-on experience that will enable us to build more powerful hosting solutions for our customers and ASP partners," Henning Kagerman, co-chairman and CEO of SAP, said in a statement.

SAP, which has already partnered with a number of smaller ASPs, such as eOnline and Applicast, to host and manage some of its software, said its new company will not directly compete against its partners.

Engel said the company will compete directly with larger software firms, such as Oracle's own ASP unit, called Business Online, and PeopleSoft, which is slated to launch a new ASP division soon.

News.com's Melanie Austria Farmer contributed to this story.