Henning was speaking after announcing that SAP AG, Telstra Corporation Limited of Australia, and PricewaterhouseCoopers have teamed up to host SAP's enterprise resource planning (ERP) solutions in Australia and New Zealand. See related story on internetnews.com, SAP Joins Telstra, PricewaterhouseCoopers ASP Alliance, Jul 25th 2000.

The new alliance is one of many partnerships the company has on the anvil to set up ASP operations with the involvement of telcos, he said. SAP will rent the software to the ASPs on the basis of the number of users per month. The strategy was originally launched more than a year ago - see related ASPnews.com story, SAP confirms hosting strategy, May 5th 1999.

"Telcos have more than the bandwidth. Their main asset is the relationship with the customer," Kagermann explained. "These infrastructure providers also have the call centers in place."

But telcos lack the necessary skills to deliver the entire solution, he added: "They do not have the knowledge to run this business." To meet the requirement for software customization, implementation and training, SAP is working on partnerships that will include business consulting firms and systems integrators, as well as the telcos who bring the infrastructure.

In the tie-up with Telstra and PricewaterhouseCoopers for instance, the alliance will draw on Telstra's data center, communications, and ISP skills to provide the platform for Internet delivery of ERP (enterprise resource planning) and CRM (customer relationship management) solutions. Meanwhile, PricewaterhouseCoopers' ERP and CRM consultants bring to the alliance its experience in web-enabled ERP integration.

Customer relationship

Typically the telcos will front-end the deal, and Kagermann predicted a growing movement by telcos to offer ASP services. "What the telcos are offering today is a commodity service. If somebody buys the bandwidth from them, and puts the value-add on top and goes to the customer, the telcos will lose the customer relationship. Therefore the telcos will do whatever arrangement is necessary to stay near to the customer, by running the call centers, doing the invoicing, and doing the cash collection," he explained.

That said, SAP will insist that the customer has a choice of interface to either the telco or any of the other partners who are offering the ASP solution. "The very low-end customer may go to the telco, while the medium-sized customer has a business partner, and customers at the high-end have a relationship with us," explained Kagermann. "If we would like to provide the service to all types of customers, it is not true then that only the relationship with the telco is important."

SAP clearly would like to have some control on its ASP partners' deliverables to customers, either through direct partnership, or through the company's certification process. The fear is that, if the service is not up to the mark, the customers in the final analysis will turn to SAP for redress.

SAP expects that the ASP model will be attractive mainly to small and medium businesses because of the rental-based pricing, as well as avoiding the need to invest in hardware infrastructure. "For the high-end customers, it is more attractive to buy now, and get technological protection for the next years," said Kagermann. "The deal is that we protect them for the next years, so that they get as part of the contract whatever we invent."

SAP does not therefore expect ASP operations to contribute significantly to the company's revenues, as deals with small and medium businesses tend to be much lower in value. It expects revenues from licensing its software to large customers will remain the major component. Kagermann said ASP related revenues will not go beyond 10 per cent of SAP's overall revenues in the next two years.