Don't choose "pie-in-the-sky" service. selection - application service provider ASP - Internet/Web/Online Service Information

Communications News, Jan, 2000 by Sam Amore

Determine whether an ASP is right for you.

In this era of rapid technological change and scarce technical resources, outsourcing business applications -- can make a lot of sense. Application service providers (ASPs) can achieve much greater economies of scale than individual enterprises and can make more efficient use of human resources in a tight labor market. And enterprises can refocus their IT staffs on mission-critical, revenue-generating projects.

There is no dearth of ASPs from which to choose. The Internet gold rush has given birth to thousands. Their collective repertoires range from horizontal applications like Lotus Notes and IP-based telephony to vertical solutions like HRMS client/server systems. Only a handful, however, have any hope of providing the value you seek.

When a phenomenon springs into existence so rapidly, fact gets mixed with fiction, and you need to sort out the myths before you evaluate ASPs.

Myth #1: An ASP is an ASP is an ASP. Some ASPs offer a broad range of general business applications, while others provide in-depth expertise in a particular ERP (enterprise resource planning) or vertical application. A PeopleSoft HR solution requires a higher level of ongoing support than a Notes implementation, and the ASP in question has to be able to supply it. ASPs originate from diverse backgrounds--from system integrators to hardware and software vendors. Some even provide back-end business-processing services like payroll or claims administration.

Myth #2: ASPs are all Internet-based. Popular accounts have portrayed ASPs as dot-com companies providing application renting via the Web. This is the case for lower-end applications. More sophisticated applications can be delivered over the Internet or through VPNs, but most customers are requesting a secured dedicated line. Services are being delivered primarily over private WANs that companies already have in place, and do not use the Internet. For strategic applications, an ASP can use the Internet for increased application functionality, such as self-service enrollment programs and key manager access, while using private lines for more sensitive functions like payroll.

Myth #3: The bigger the ASP, the better. While bigger can enable better economies of scale, it can also mean an organization and/or its services are less focused. ASPs with a broad range of offerings may not be able to deliver the support you need. A big ASP doesn't mean you get their "A" team. Conversely, a small ASP doesn't automatically guarantee focused, personalized service.

Myth #4: Only smaller companies should use an ASR Companies that are struggling with applications, or that don't have infrastructure--or desire--to postpone large capital expenditures, are all candidates for an ASP model, such as one that desires a highly customized application.

Myth #5: Using an ASP will save money. In a greenfield installation, an ASP might save you 20% or so up front because you don't have to buy a software license or hire an application administrator. But, if you are replacing an antiquated mainframe system with state-of-the-art network computing and moving in-house employees to new positions rather than reducing your staff, your bottom-line costs could actually increase. Benefits come from gaining a more robust application and building value by redeploying staff resources to more strategic, mission-critical applications. You also reduce the "soft" IT costs you incur when business managers spend time providing application support or getting involved in business processes they should be able to take for granted.

Myth #6: Everyone is going the ASP route! Outsourcing is hot. Analysts predict double-digit growth. Companies that embrace ASPs are driven by a wide variety of issues. Don't assume that outsourcing is for you just because your industry accounts for a lot of the early adopters. Don't assume it is not for you if the reverse is true. Ask prospective ASPs for appropriate references.

Myth #7: Using an ASP means losing control You are offloading drudgery and headaches onto ASPs, not surrendering control to them. Designate a liaison with the ASP and hold regular steering-committee meetings.

Myth #8: Using an ASP means your staff is inept. Actually, outsourcing often means just the opposite. Your staff is too valuable to be used for tasks that can be handed off to an ASP.

Myth #9: Select your application first and then find an ASP. As applications become increasingly commoditized, ASPs will try to distinguish themselves with value-added offerings, such as business-process outsourcing.

Myth #10: The more critical the application, the better to use an ASP. The horizontal, non-mission-critical applications actually lend themselves better to the outsourcing model. They are more generic and less customized, and ASPs can leverage experience and infrastructure across customers.

Myth #11: There is no way to price ASP services. It isn't difficult to price services if you have set objectives and delineate the scope of what you want. If you need full service, make sure you aren't being quoted a bare-bones base price that will be increased as services are added. How many hours of customer support and training are included, and how many users and sites are supported? Is connectivity included? Round-the-clock support for 4,000 associates can be very expensive, but you might still meet your objective by limiting access to 25 key people, 12 hours daily.