Modern ERP hosting models should catch on

Every good idea in IT ultimately has its day, even if it turns out to be a second coming. This looks like being the case for IT hosting services aimed at SME manufacturers. Previously, application service provision (ASP) offering remotely served and maintained ERP functionality promised to ease the strain of operating IT and reduce the associated overheads. Yet the ASP proposition did not deliver what the mid-market expected – improved IT efficiencies and cost-effectiveness. This is now changing: utility computing is taking hold. Utility computing differs from traditional outsourcing: it provides IT on demand and paid for on a per-user basis. Its proponents claim it's an advance on old style outsourcing, with its inflexible contracts. Computer Software Group (CSG) is one of just a few service suppliers championing variations of the new approach. This company aims its IT services squarely at mid-market manufacturers, and draws on its acquisition of JBS Computer Services and its ERP platform for the software itself. Now called Chorus ERP, that's what sits at the heart of its hosted infrastructure. Called Applications On Demand (AOD), the service delivers capacity only when required, says Neil St John, Chorus sales manager. Smaller-scale manufacturing companies with little or no IT department can thus benefit from harnessing a serious ERP suite without paying the normal price. St John reckons his company, for example, can deliver IT services on a similar basis to the supply of gas or electricity. The firm offers a contract that provides a standard amount of disk space and no limits on processing power. User levels can vary over time and CSG takes a granular approach to on-demand billing. Services are delivered via high-speed broadband connections supplied by BT, and the firm has 17 clients using its service. Significant benefits There are several advantages: like removing the cost of internal IT, with a once yearly as-used payment instead, and no asset depreciation. Other benefits come from, for example, harnessing a system that supports flexible working and mobility. With password and security clearance, staff at CSG's clients, for instance, can work anywhere. And for mid-sized manufacturers, relatively easy broadband connection does sound attractive. Manufacturing users include coatings specialist Carrs Products and Caparo Wire. Both say they're pleased with the service. Carrs' former finance director Chris Stockley says it took an open minded approach, but that it's delivering dividends. "The fact that we no longer manage the server means that staff have time to improve the way we use the system rather than fire fighting," he says. He also points to what he describes as an "excellent service" as well as the fixed cost. Caparo Wire also appears to have gained an edge from its AOD implementation. The company has benefited from easier data downloads, higher visibility and better data analysis. "It was almost as if they had been a fly on the wall in our management meetings and knew what issues were giving us problems," says former Caparo financial director James Chirgwin. The utility computing ERP model may well catch on where ASP merely nibbled at the edges. Mark Grisdale, commercial director at independent ERP consultancy CCL in Stratford, sees the AOD service as valid, and would consider recommending it to manufacturing users. "The offering works and the company is now better positioned financially. Compared to the depressed balance sheet for JBS, this removes any bar to recommendation," he says. Decent hosting services for mid-sized manufacturing firms still remain few and far between, but rented ERP software and services at various levels look set to feature more strongly over the next couple of years.