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Software // Enterprise Applications
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6/17/2004
09:30 PM
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Fast Track To Success

Small and midsize businesses find that using hosted apps gives them flexibility and frees them to focus on business optimization

Cirque du Soleil's Magic lured nearly 7 million spectators under its tents last year to marvel and applaud its artistry. Imagine trying to track 700 tons of costumes, personal belongings, furniture, kitchen equipment, and school and office supplies hauled in 350 trailers convoying across the country to support performers in five concurrent tours. Not to mention the equipment used in four permanent shows presented in theaters in Orlando, Fla., and Las Vegas.

Cirque du Soleil Inc., known for its visual creativity and romantic acrobatics, is anything but an ordinary midsize business, grossing more than $500 million in revenue last year. The company has experienced steady growth since 2000, up 1,000 employees to 3,000 worldwide. New shows performed by 600 artists are introduced annually, compared with every three years in the past. There's little doubt this success has created a strain on the 100-employee IT department to keep pace.

Hosted apps help track some of Cirque du Soleil's 700 tons of equipment and about 600 performers across five concurrent tours and in three permanent locations. Photo by Paul Chiasson/CP/AP

Hosted apps help track some of Cirque du Soleil's 700 tons of equipment and about 600 performers across five concurrent tours and in three permanent locations.

Paul Chiasson/CP/AP
So when the Canadian entertainment company decided in November to add six SAP software modules to support logistics, finance, and human resources for its growing operation, it turned to IBM to host the applications instead of managing them in-house.

The applications are hosted on Unix servers, but Cirque doesn't have Unix expertise, says Danielle Savoie, Cirque's VP of information technology. "Support is required for our business 24 hours a day, seven days a week."

The applications range from materials management, sales and distribution, and project management to human resources and financial programs such as accounting. Logistics applications will enhance procurement capabilities and track equipment movement on different tours around the world once the inventory is entered into the system. A storage area network with 1.6-terabyte data capacity replaced three old systems and is expected to last through the year.

Small and midsize businesses, which InformationWeek defines as having annual revenue less than $1 billion, are increasingly entrusting service and software providers to host and manage their customer-relationship-management, sales-force-automation, enterprise-resource-planning, and supply- chain-management applications. Research firm AMI-Partners Inc. forecasts small and midsize businesses worldwide will spend $3.8 billion on hosted apps in 2005, up from $2.9 billion this year.

For many small and midsize companies, it's more efficient to contract for hosted services than build an internal infrastructure because most application agreements are flexible and have a variable cost structure.

The hosted model offers around-the-clock technical support, as well as flexible bandwidth, storage, and processing power to accommodate seasonal peak business requirements. The application environment is typically collaborative and accessible from any computer's Web browser.

Companies can choose to buy or lease the hosted application. Buying enables companies to have applications customized as required, but the vendor will run, manage, and support both software and hardware from a remote site. Leasing typically means tapping into one copy of the application that resides on a bank of computers at the hosted site to which many organizations have access. Each company's data is kept separate in either scenario. Two cost models also exist: fixed and variable.

But while searching for the perfect solution, companies should beware of hidden costs and ask about special promotions vendors may not readily advertise. Make sure upgrades, updates, training, and support are included and that no penalties occur if there's a sudden reduction or increase in users. Watch for integration, data security, and other hidden charges. Negotiate downtime compensation requirements if they're not already written into the terms and conditions of the contract.

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