I predict the burgeoning growth of the Applications Service Providers (ASP) will transform outsourcing in all four corners of the globe. For the first time, outsourcing is within reach of more than just the major ballplayers. Even the little league teams can now afford to play. The ASP revolution is modifying who can use software, how it is used and the way it is sold. ASPs may even be able to force the software prices down.
There are many reasons why the ASP market is one of the fastest growing segments of the outsourcing revolution. In my experience, the initial attraction usually is cost. ASPs allow companies the world over to have access to world class software. For the first time, they can afford to use an expensive Enterprise Resource Planning (ERP) or Customer Management System (CMS) application by sharing its use through outsourcing.
Currently, Human Resources and ERP are the most popular outsourcing areas for ASPs. But I feel that will soon change as ASPs begin to expand into all areas of business including lead generation, finance and accounting, and facilities management.
Companies are turning to ASPs because they provide a faster adoption and implementation curve. Arriba, for example, has guaranteed it can have its applications up and running in 60 days or less. This is much faster than a company new to the software can implement it by doing the installation in-house. In today’s world, where things move at e-speed, this is a significant benefit.
ASPs also eliminate the need for finding and retaining skilled high tech employees, one of the rarest commodities around these days. By outsourcing to an ASP, small and mid-size companies can enjoy the benefits of the software without having to acquire the sophistication needed to run it themselves. Knowing the inner workings of server farms is now not required.
Two Types Of ASPs
Type A is a throw back to the original ASPs, which provided a time-share environment. What’s different today is the technology. The old time-share applications ran on an IBM mainframe computer. That technology had the ability to measure usage by application. That made it easy to host many different clients on the same machine.
It is difficult to run an ASP that way today since the monitoring tools are no longer there. UNIX and NT servers are not configured that way.
Instead, the time-share ASPs are becoming Internet Presence Providers (IPP); this allows them to host the applications on the Web. They charge by the bandwidth used and the disk space needed.
The buyer, however, is responsible for all aspects of the application. Its software engineers determine how to configure the program, fix it if a module becomes corrupted and back everything up in case there’s a data disaster.
Type B is the ASP who is responsible for the entire process. This makes them accountable to the buyer, who measures their performance through agreed upon metrics. I believe these knowledge-based companies will become the stars of the ASP universe whose business will continue to grow at a geometric pace.