German software giant SAP is teaming with Hewlett-Packard to offer mid-market companies a hosted software offering that includes applications, maintenance, services and support for a monthly fee.

The offering is aimed at giving midsize companies with limited IT resources predictable software costs, said SAP spokesman Jim Dever. The service starts from US$325 per user per month. Unlike many other hosted offerings, customers end up owning the software licences through an SAP financing programme which can span 3 to 5 years, he said.

The lease-like offering will initially target vertical industries such as food, fuel and high tech device manufacturers with enterprise resource planning (ERP) software tailored toward their needs, Dever said. Customers access the applications through a Web browser, while HP hosts the software at its data centres, and offers services such as storage and recovery along with technical support.

Although the service is being rolled out exclusively in the US, it may eventually be offered in other regions if successful, Dever said.

SAP and HP have been long-time partners in providing hosted software services, but the new offering marks an evolutionary step for the providers, Dever said.

"SAP and HP are giving companies a single source for a comprehensive ERP solution that lowers their risks and gives them a predictable cost over time," he said.

While the hosted software model is not new for SAP, the offering is interesting because it allows the company to transition customers to new technology and generate fresh revenue, while at the same time reducing the cost of supporting customers on older platforms, said Neil Ward-Dutton, director of technology practices at Ovum.

"This is an interesting approach to licensing for customers who don't have new money to spend, or cannot spend it in big chunks," Ward-Dutton said.

Cost transparency is especially important for midmarket companies with limited IT budgets, Dever said. SAP defines the midmarket as companies with annual revenue under $1 billion.