HP, Rearden Alliance To Alter Services Game

Under terms of the deal, HP will be reselling as a service a set of software applications that allow business users to aggregate the purchasing of services from airlines, hotels, rental cars and restaurants.

The core element of the Rearden Employee Business Service is a set of back-end applications developed and managed by Rearden Commerce, a San Francisco-based ASP.

The goal of the service, said company CEO Patrick Grady, is to displace the multitude of individual applications companies have to manage these transactions, which usually are aggregated underneath a portal. For solution providers, such a service could represent a challenge from HP because the tasks involved in building the portal and the associated applications usually are a source of technology integration revenue.

Grady said he expects to offer a recurring revenue model for HP solution providers willing to resell the Rearden service. Moreover, he expects to expand the service to cover a number of application areas, which will be funded by HP and other major partners that Rearden expects to sign shortly, he said.

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"There is nothing exclusive about the HP alliance. We've convinced them about the value of the network effect around this," said Grady. "Any one of the global IT ecosystems that believe in on-demand, Web services, have huge development communities and want to rationalize their cost structure around services is [who] we want to have conversations with."

HP executives said outsourcing is the fastest-growing segment of the HP portfolio, growing 38 percent year over year in the fourth quarter of 2004.

Marlene Brill, president of Digitask Consultants, a New York-based HP solution provider, said she will evaluate the service opportunity when it is formally unveiled. That said, she noted Digitask does not usually sell other companies services.

"It would be great to add on to our services if it made sense, but it doesn't usually make sense," she said. "I end up giving away my clients. And [the vendor is] letting me take 1 percent!"

In general, as the software-as-a-service model continues to gain momentum, solution providers must decide whether they want to compete with companies selling these services or resell the services provided by these companies. And if they resell, they must decide whether they are content picking up a one-time agent fee—as they do reselling services from Salesforce.com—or whether they require ongoing revenue.

"Anybody who is a reseller for us participates in an ongoing basis," Grady said.