PeopleSoft aims hosting services at midmarket

PeopleSoft Inc. said Monday it has created a new portfolio of hosting and application management services for midmarket customers, companies with annual revenue under $1 billion.

The new hosting service, initially only available in the U.S., will give customers who license PeopleSoft's software access to storage, database and hardware at a lower cost than its traditional hosted services aimed at large enterprises, said PeopleSoft of Pleasanton, Calif. However, the company denied published reports that the new offering represented a significant cut in its prices for hosting services, because the new services are markedly different from its existing enterprise services which remain unchanged in price and configuration.

"We're delivering a completely different offering," said Bill Henry, vice president of marketing and strategy for the company's global hosting services. "This is built specifically to meet the needs of the midmarket. We chose to use some lower cost technologies that meet midmarket needs but might not scale" to meet the needs of the largest corporations, he said.

Among the differences between the midmarket offering and the upmarket offering are disk-attached storage instead of a storage area network, and the use of a Microsoft Corp. SQL Server database instead of an Oracle Corp. database, explained Don Duszynski. These infrastructure differences result in lower overhead which can be passed on to the customer, he added.

Price-sensitivity is high among midmarket customers of customer relationship management (CRM) software, and PeopleSoft will have to bring prices to within the range of $65 to $70 per user per month if it is to compete for this market, Gartner Inc. CRM analyst Jim Davies said Monday.

The midmarket is "a huge growing area and they all want a slice of the pie," Davies said.

Unlike other vendors, who price their products according to the number of "seats" required, PeopleSoft has to date calculated its pricing on a "value-based strategy, based on a complex algorithm to do with the number of employees, the revenues of the company -- and that probably makes it too expensive for the midmarket," he said.

A PeopleSoft spokeswoman Monday said that because of its value-based pricing, the company cannot give prices for the hosted offering.

PeopleSoft's move does not necessarily suggest prices will fall across the CRM marketplace, IDC analyst Bill Clough said Monday. PeopleSoft is quite a new player in the hosted CRM market with relatively high prices, and would be looking at how to change that, he said.

Three levels of service are available to the midmarket; Value, Enhanced and Ultimate. The basic, Value proposition guarantees 99.5% availability and limited access to support services. Enhanced also offers 99.5% availability, but includes more applications and gives access to the helpdesk for longer hours. The Ultimate service gives 99.9% availability and 24 hour a day helpdesk support, PeopleSoft said.

Surebridge Inc. in Lexington, Mass., will provide the hosting services for PeopleSoft, the company said.

The service will be expanded to Europe, the Middle East and Africa later this year, a spokeswoman for PeopleSoft U.K. said Monday.

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