Sourcing Solutions For Wired World Emerging

Software Magazine, June, 1999 by Dan Kara

PROFUSION OF OPTIONS MAKES SCREENING, SELECTING A VENDOR EXTREMELY DIFFICULT; HERE ARE 4 CATEGORIES OF PLAYERS TO HELP GUIDE DECISION-MAKING.

Two industry trends are currently acting in confluence to transform the way organizations conduct business--outsourcing, and the ascension of the Internet/Web as a global application platform. The result--Web-sourcing--is an emergent new generation of outsourcing services, or combination of services and applications, that are specifically designed to capitalize on the low cost and global reach that defines the Internet/Web.

Outsourcing is a strategy that has been successfully employed for years as a method to bridge the competency gap required to quickly provide state-of-the-art technical capabilities--at a reduced cost to boot. Most Fortune-class organizations currently outsource some component of their IT and network strategies.

The existence and ongoing commercialization of the Internet/Web as a global, open "wire" presents the business community with many opportunities. New applications built with the latest tools and techniques offer businesses access to untapped markets. Business as we once knew it has been irrevocably changed.

Outsourcing and the Internet/Web are naturally synergistic and their pairing could not be better timed. The same business benefits and economies of scale that have made generalized outsourcing a success also apply to Web-centric outsourcing, perhaps more so. Not only can outsourcers offer more robust, timely, and complete services than most companies can provide internally, they also provide technological expertise and leadership in the fastest-moving of all IT segments--the Internet.

The Web is central to the concept of Websourcing, but Websourcing is more than the simple intersection of outsourcing and the Internet/Web. And it is not simply outsourcing for the Web, either. Rather, Websourcing can be services alone, or a combination of applications and services, but not applications alone. When applications are part of a Websourcing solution, they are either of a new class or they are traditional applications treated in a completely new way. Regardless, there is some type of service component involved.

A Market on the March

A rapidly growing number of business and technology managers view Websourcing as the best mechanism for their organizations to exploit the full potential of the Web, quickly, less expensively, and more thoroughly than their competitors. Stamford, Conn-based Meta Group, for example, believes that more than 75% of Global 2000 organizations will utilize third-party Internet professional services firms for their complex Web-based efforts, up from 30% in 1998. Furthermore, strong growth is predicted for all manner of Websourcing (Figure 1).

Dollar figures are no less impressive. For example, Forrester Research, Cambridge, Mass., estimates that Internet-based application outsourcing alone will be a $6.4 billion business by 2001. Similarly, Meta Group places a valuation of $22 billion on the total Websourcing market, while other studies predict a $40 billion market in the same time frame.

As the opportunities on the Web have burgeoned, so have the number of new Websourcing providers. Most of the first wave of Websourcing players are relatively small, but it is equally true that they tend to be led by industry veterans, and are well funded (venture capital). They were also focused exclusively on delivering Web and e-commerce solutions (and by implication they are experts in the same) -- becoming market-share, as well as mindshare, leaders in the burgeoning Websourcing market. Many of these vendors have recently gone public. USWeb/CKS, Santa Clara, Calif., USinternetworking, Annapolis, Md., and Pandesic, Sunnyvale, Calif., provide examples of this class of Websourcing provider.

A number of the outsourcing giants such as IBM Global Services, Electronic Data Systems (EDS) and Andersen Consulting also now offer Web-related services. This class of Websourcing/outsourcing vendor is looking to Internet and e-commerce development, Web services, and Web application hosting as a way to make up for declining ERP implementation and Y2K remediation revenues. These vendors are large, stable, multi-national firms, that are quickly adding personnel (when they can find them) specifically to target the Websourcing market.

The profusion of Websourcing providers makes the process of screening and selecting a vendor, or simply even determining who the Websourcing players are, difficult in the the extreme (to say nothing of avoiding Websourcing pretenders.) The purpose of this article is to provide business and technology managers with an overview of the various Websourcing options available for meeting their business needs. It will also describe the potential and pitfalls utilizing the various on-line service solutions, so that business and technical managers can make intelligent decisions when selecting a Websourcing provider.

The Websourcing market can be divided into four separate segments: Web application hosting (Internet hosted applications), Web services (e-services), Web site hosting and advanced ISP services, and finally, outsourcing the development and deployment of Internet transactional systems and e-commerce systems.