Thrift Pays: Small Companies Say Hosting Saves MoneyThrift Pays: Small Companies Say Hosting Saves Money

The recent resurgence of the application-hosting market is helping some smaller companies make the most of their IT resources (see story, Good Hosts).

With just two IT people on the staff of Ferrotec USA, including IT director Rob Blinn, minimizing technical complexity is a big goal. Blinn contracted with Oracle to host its applications and manage and support project implementations. "We need that extra extension of the IS organization, and clearly Oracle's outsourcing is a big part of that," Blinn says. He estimates that if Ferrotec had to hire an IT staff to manage Oracle apps and buy the supporting infrastructure, it would add another 40% to 50% to the project's costs.

Executives at Kvaerner Power Inc. also say it makes sense to leave the heavy IT lifting to an organization that can focus all its attention on that. The company has an IT staff of two, down from nine in 2000. Since Kvaerner began using Oracle's hosting service, IT director Woody Muth says, the power-boiler maker has cut its ERP software and support costs by 31%.

There also are soft benefits to outsourcing. Users get answers to their help-desk queries much sooner, and problems, such as an application error, that used to take days or even weeks to fix are taken care of in minutes or hours.

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Illustration by Alison Seiffer