Internet Outsourced Application Provides IT Cost Reduction - healthcare industry - Industry Trend or Event

Health Management Technology, July, 1999 by Jack D. Anderson

Pressure to reduce IT overhead pushes many healthcare organizations to consider outsourcing. And, many organizations turn to outsourcing because it is so difficult today to recruit, hire, train and retain competent IT staff. With the use of Internet technology, one now has a new alternative for IT outsourcing.

The most promising approach to outsourcing using the Internet is called the "Application Service Provider" (ASP) model. It allows you to simply access and run a software application over the Internet on a monthly subscription basis. This summary answers some basic questions on the ASP concept and explains how it might benefit your organization.

First, what is on "Application Service Provider" (ASP)?

According to International Data Corp., a prominent IT research company based in Framingham, MA, ASPs are firms that host, deploy, and lease software applications over the Internet from centrally managed network facilities.

How does an ASP work?

An ASP provides application software and the necessary technology infrastructure to host and deploy applications over the Internet. The ASP manages the hardware for the network and hosts the software on its servers. Customers pay a monthly software subscription and download and run applications over the Internet from the ASP's servers.

What are the advantages of using an ASP to outsource application hosting?

The main advantage to customers under the ASP model are lower software acquisition costs, reduced system maintenance costs, faster implementation of applications and upgrades, and ready deployment of applications across geographically dispersed sites.

Some analysts estimate that the total cost of hosted applications can be 25 to 30 percent less than licensing and managing applications internally, because the customer does not have to buy, install and maintain the software on its own servers.

Plus, it requires fewer internal IT staff to maintain and manage the application because the ASP does it for you. Thus, whether you are hiring your own IT professionals, or contracting out for them, the ASP model reduces your IT staffing requirements and costs. In addition, the ASP model makes it easier for you to try out software on a trial basis. This helps reduce your risks and costs.

Are many software application development companies adopting the ASP model for software pricing and distribution?

Vendors such as Lotus, PeopleSoft, Baan, Lawson, SAP, I.D. Edwards and Oracle have all announced major initiatives to host applications over the Internet.

Is the ASP model becoming an IT standard?

Two dozen companies (including AT&T, IBM, Cisco Systems, Citrix Systems, Compaq and Great Plains Software) joined together to form the Application Service Provider Industry Consortium, whose mission is to sponsor research and foster standards in the rapidly developing ASP market.

What are the qualifications of a premier ASP?

Steve Murray, an Internet Commerce Analyst at International Data Corp. observes that: "The best ASPs will have an ideal combination of proven Internet technology, advanced security, and a national network to serve customers. In addition, ASPs offering applications based on a software design with thin clients and an object oriented architecture that supports true scalability and adaptability should have a distinct advantage."

In the healthcare industry, who can benefit from the ASP model of outsourced application hosting?

For physician group practices and other healthcare organizations with limited IT resources and staff, application outsourcing using an ASP may be the ideal solution.

Integrated delivery systems with geographically dispersed provider networks can also clearly benefit.

Running software over the Internet from one common database allows multiple users across separate sites to access, share and use data. Thus, a patient's records and data can easily move throughout a provider network as the patient receives care from various physicians and other providers.

How is the healthcare industry responding to the ASP model for deploying software?

Many users are keenly interested in the advantages of the ASP model. According to James Snyder, M.D., director of Clinical Process Improvement at Southwest Medical Associates, Inc., Las Vegas, NV., "Physicians are looking for integrated solutions that help us care for our patients and run our business. Running applications over the Internet from a centralized server managed by a competent firm that gives us high-speed access, and paying a monthly subscription instead of buying a supporting software, can be a practical, cost-effective solution to our problems."

Jack D. Anderson is chair and CEO of Object Products Inc., San Francisco, CA.