The Value of Opting for an ASP (supplement) (Oct-2000)

Some CIOs worry about losing control to application service providers, but in fact ASPs are helping CIOs improve responsiveness, cut costs and boost strategic leverage.
    They are the leaders in their fields and they tap the richest of our time's technology lodes-software application developers, Website hosting companies, Internet service providers, telecomm giants, professional services firms and value-added resellers. And they're linking themselves together into a multiplicity of application service provider supply chains that host access to all manner of software applications using private networks and, increasingly, the Internet.
    ASPs are not only making high-end enterprise computing affordable for smaller companies. ASPs are also giving big-company CIOs reason to pay attention at a time when IS staffing is problematic and meeting corporate IT needs has never been tougher. They offer:

• Fast launch for new e-commerce, supply chain and CRM apps.
• Less spent on buying, maintaining and upgrading software and hardware to run commodity applications.
• Client software limited to a Web browser or something that acts a whole lot like one.
• Easy upscaling and downscaling.
• Lower IS staff needs.
• Improvements in IS' ability to respond to demands from the lines of the business.
• Predictable costs.

    "The difference between enlisting an ASP to deliver your applications versus keeping them in-house," observes Andrew Stern, CEO of USinternetworking, Inc., "is a little like the difference between buying a car with options that suit your needs versus building it from scratch in your garage."

Heavy IT lifting
For modest setup charges and a monthly fee on, typically, a one-to-three year renewable contract, users access all manner of applications, communications and infrastructure capabilities, mainly:

• Enterprise applications, including enterprise resource planning (ERP) and customer relationship management (CRM), supply management, human resources, financial management.
• Productivity applications (from Microsoft, Corel and others) are getting ready for hosted network access.
• IT and network infrastructure, including network services, complex mission-critical hosting, software and hardware provisioning, infrastructure integration and support services, business continuity services, network management and administration services and managed virtual private networks. Service providers also deliver network-based access to processing power and remote data storage facilities.
• E-commerce and communications platforms, evolved from Website hosting to building and managing e-commerce platforms, including auction sites and other complex transaction sites. Providers also offer messaging, voicemail, IP fax and hosted collaboration platforms as well as portals trying to get "sticky" with free Web e-mail, contact management and calendaring honey.

    In a newly emerging ASP business model, specialty providers create supply chains able to do some pretty heavy IT lifting: access to e-commerce or supply chain management or ERP apps from one provider, network bandwidth from another, storage from yet another. And one provider-yours-takes the lead, packaging the services, contracting to achieve the performance levels you need, ensuring a single point of contact.

ASP Industry Consortium: Promoting the Common Good An international application service provider advocacy group, the ASP Industry Consortium sponsors research and articulates the strategic and measurable benefits of this evolving delivery model.(The Consortium's latest research, co-sponsored by CIO, is highlighted in Compelling Numbers Point to Accelerating ASP Use.) The Consortium invites the participation of ASP companies, software and hardware companies, network service providers, ISPs and others in achieving several goals: Promote best practices Foster open standards and guidelines Develop common definitions for the industry Sponsor research in the industry Serve as a forum for discussion about the industry Educate the marketplace Check Out the ASP Buyers Guide To help IS managers and business executives alike make informed decisions about purchasing ASP services, the ASP Industry Consortium's Education Committee has just published the Application Service Provider Buyers Guide, which is available on the Consortium's Website, www.allaboutasp.org. Focusing on key ASP issues, the Guide offers suggestions for evaluating ASPs, directs readers to resources that can provide further information, and tackles some important questions: What is an ASP? What types of applications can be accessed through an ASP? What are the benefits of the ASP model? What size companies work with an ASP? What steps should be taken in evaluating and choosing an ASP? What key areas should be researched in assessing an ASP? What questions should be asked of an ASP? How are data centers and security handled by the ASP? What elements should be included in a service level agreement? What are the ASP's software and hardware capabilities? What are the cost/pricing models? The Consortium provides other online educational services through its Website, too, including common ASP industry definitions, a list of member companies, frequently asked questions and industry news and analysis. Formed in May 1999 by 25 leading technology companies, the ASP Industry Consortium now has 550 members. For more information about the Consortium, visit www.allaboutasp.org, e-mail info@aspindustry.org, call 1-781-246-9321 or contact the Consortium's headquarters at 401 Edgewater Place, Suite 500, Wakefield, MA 01880.

    It's a model with a lot of appeal and, by any measure, it's spawning a busy marketplace: last year, says the Gartner Group, companies spent $2.7 billion on ASPs. By 2003, they'll spend $16 billion on ASPs, according to International Data Corp., or even as high as $22.7 billion, thinks the Gartner Group.
    "Today's corporation is under increased pressure to keep balance between internal resources, infrastructure and the bottom line," notes Kevin Blakeman, president of SurfControl, Inc. "Using an ASP can allow the CIO to service the growing demands of his customers without allocating more resources, or adding more infrastructure, and in most cases-with less of an impact on the bottom line. In most cases, a CIO will see better deployment of their scant existing IT resources, a reduction in training and reduced implementation and upgrade costs."
    To find out how much the ASP model is being embraced, CIO and the ASP Industry Consortium conducted a Special Survey of CIO readers. According to our survey results, enterprises large and small are turning to ASPs in significant numbers for all manner of applications. (To find out more about what CIOs think of ASPs, see Compelling Numbers Point to Accelerating ASP Use.)

By Any Other Name According to the counters, there are somewhere around 300 ASPs, and they've coined almost as many descriptions of themselves: Application service providers (ASPs) Managed service providers (MSPs) Network service providers (NSPs) Netsourcers Total service providers (TSPs) Software rental Network applications Hosted applications Application outsourcing Application dial tone, or "app tone" "Webifying" applications

Help where you need it
Because they transmute IT functionality into a utility service, ASPs often attract the interest of people running lines of business in an enterprise. That's because ASPs help exactly where businesses need it:
    As competitive pressures build, businesses are focusing resources on their core competencies. "Perhaps the most fundamental justification for the ASP model, in any industry, is that it allows a business to focus time, energy and resources on its core competencies-the thing that sets it apart from its competition-and not on its IT infrastructure," asserts Herb Hribar, president and CEO of Interliant Inc. "For example, as businesses look increasingly toward electronic commerce solutions, issues like security, registration and payments, and Internet-based technologies become critical concerns. ASPs can handle them all without detracting from your primary business focus."
    Finding the right IT people to build and support in-house systems has become, at best, extremely difficult. "Maintaining in-house IT resources to run a corporation's mission-critical application computing environment is increasingly challenging," says Bobby Patrick, vice president of strategy at Digex, Inc., "both because of severe IT worker shortages and the need to keep systems running and available 24 hours a day in a global economy. These factors are compounded by the rapid pace of technology change, which keeps corporations on an upgrade treadmill with the attendant ongoing capital and productivity costs."
    CIOs and IT managers often lack the resources to meet urgent development needs-such as getting e-business initiatives up and running. "Organizations are moving faster than ever, and cannot spend a six-to-twelve-month cycle implementing solutions," points out Maria Burud, senior vice president at Infinium ASP. "And they do not have the expertise and resources available in-house to shorten that cycle. ASPs enable organizations to deploy their scarce and expensive IT resources to more strategic initiatives, and reap the benefits of rapidly implemented solutions." Certainly, ASPs contribute to a continued merging of IT and business interests. (The implications are explored briefly in ASPs: Setting Off a Sea Change.) And, of course, there are trade-offs.
    Your IT professionals relinquish hands-on control of the application to a SPOC (single point of contact), you have no license to the software, and you've made a contractual commitment that discourages leaving early. And you're betting on a performance chain of third and fourth parties beyond your reach.

"Digital Independence" From Citrix Systems Founded in 1989, Citrix Systems, Inc. (NASDAQ:CTXS) has established itself as the global leader in application server software and services for the enterprise and Application Service Provider (ASP). Citrix's application server software and services offer "Digital Independence"-the ability to run any application, on any device, over any connection or network, wireless to Web-so that now, everything can compute. Compete in an Interconnected World Citrix application server software and services enable organizations to run applications on servers that can be accessed from a variety of client devices running over 20 different operating systems. Since the applications are installed and updated on servers instead of on each client, the complexity, time and resources required to manage the applications are reduced. Local and remote users can easily access the latest applications over the Internet or other connections. In addition, Citrix NFusetm provides organizations and ASPs with the ability to deploy disparate applications and interactive content into any standard Web browser-creating a personalized workplace portal for end-users. Citrix currently has more than 100,000 customers worldwide, including all 100 of the Fortune 100. Enterprises such as Bell Mobility, Arthur Andersen and Mott's North America are achieving significant, measurable business benefits from their Citrix application server software. These benefits can: extend the reach of any application to any user in any location on any device over any connection; accelerate application deployment and performance, independent of bandwidth; reduce risks to the level necessary to provide predictable service with centralized management, scalability, reliability and security for applications at low cost. As a result, organizations can compete most effectively in an interconnected world. Citrix MetaFrame: Key ASP Infrastructure Technology As a key ASP infrastructure technology, Citrix MetaFrame application server software is helping accelerate this market by extending the reach of "rental" applications to any client, over any network, in the fastest possible time. Its centralized application management capabilities keep ASP costs down and ensure rapid deployment of new applications and upgrades. Citrix also provides tools supporting high-quality, predictable service levels. With Citrix application server software and services customers can quickly deploy the latest business-critical applications to users around the world, while maintaining optimum manageability, scalability, reliability and security. Plus, customers can lower the overall cost of computing and increase productivity across the enterprise. For more information on Citrix Systems, Inc., go to www.citrix.com.

    For access to large enterprise applications, ASP customers often forego any but quick-and-dirty customizations, so large companies with complex business processes linked to a legion of legacy apps may decide not to go to an ASP for, say, ERP. But applications too specialized for major enterprise software packages, or too likely to overtax internal resources are ripe for outsourcing to an ASP.
    These risks, however, can be minimized, even neutralized, with some honest assessment of the state of your business as well as attention to contract and service-level agreement (SLA) details that assign your ASP ownership of your entire user experience. (See Finding the Right ASP.) "Few businesses can afford the time, money or people required to stay abreast of all the latest versions of their core software and other technology concerns, even though their competitive advantage may depend on their staying a step ahead," explains Interliant's Hribar.
    "The ASP model allows businesses to enjoy much higher levels of technology refresh without continual investments in new technology. New features and services become easier to roll out. Without having to independently evaluate, test, debug and develop expertise in a new technology area, trial and adoption is significantly simplified."