Hewlett Packard Co staked its claim on the emerging application hosting industry yesterday with a new strategy it hopes will squeeze out competitors such as Sun Microsystems Inc. Under a new business model it has formulated, HP says it will no longer charge e-commerce customers up front for hardware, and instead will ask for a percentage of each transaction carried out by the system. The percentage is dependent on how much hardware and software HP has contributed to the system.
HP held up its recent strategic alliance with Qwest Communications International Inc as the first major example of its new approach (CI No 3,659), but yesterday also announced a new deal with Microsoft Corp to host Exchange and Back Office applications. Qwest is hosting SAP R/3 and now also Siebel Systems Inc’s front office software over its broadband optical network infrastructure (see related story). It’s gone to HP for what its says is a near exclusive supplier agreement for the hardware, claimed to be worth over $500m. Qwest has currently built three of ten planned cybercenter server farms for applications hosting, which could eventually use as many as 23,000 HP servers. The price for the servers is actually paid to HP’s hardware division by HP’s own $3bn Finance Division, and treated as a loan. HP will provide, maintain and manage all the necessary infrastructure.
PSINet Inc is the hosting partner for a second revenue sharing deal between HP and Microsoft, under which Exchange applications will be offered on a subscription basis to large companies that want to outsource their e-mail systems management. HP intends to host the Microsoft Exchange e-mail service and offer it to business customers this quarter. PSINet will also offer an outsourced e-mail initiative for small and medium-sized businesses hosted on HP hardware.
Nick Earle, senior VP and chief marketing officer at HP’s enterprise computing solutions organization, claimed that around 50% of the new internet deals it is closing are taking up the new revenue sharing model. Currently, these account for only 5% of overall revenues. But, said Earle, the business is growing like crazy. HP repeatedly quotes figures from Forrester Research Inc which suggest the applications outsourcing market could be worth $10.1bn by 2001.
Also under the banner of its e-services drive, HP announced it has set up new implementation deals with services and systems integration companies Andersen Consulting Inc, Electronic Data Systems Corp and Ernst and Young, as well as Sapient Corp and Viant Corp.
