International Outsourcing Becomes A Brave New World | Article

Brave New OutsourcingLethem, Guyana is a remote village with little more than an airstrip and scattered mud huts. The South American town didn’t have telephones until two years ago. And the idea of using money to pay for things is still foreign to many of the 2,000 residents. Most prefer to be paid in salt because it preserves meat.

Here the Amerindian women of Rupununi have revived the ancient art of hand-weaving large hammocks from locally grown cotton. In the mid-1990s they sold one to the British Museum in London which called it “one of the most perfect forms of indigenous art we have purchased in this century.”

The museum paid the weavers $1,000 for the hammock, which is a princely sum in Guyana, a former British colony. A British foreign aid worker tried to help the women sell the hammocks to other museums using a direct mail campaign. But it wasn’t successful because the post was too unreliable.

And then came the Internet. An American who was the CEO of the Guyana Telephone and Telegraph company gave the weavers two free telephone lines, a computer and a scanner so they could sell their wares on the Web. However, no one knew how to use them. So the weavers decided to outsource their IT and e-commerce functions.

The digital revolution has brought e-commerce and outsourcing to the far ends of the globe. Today companies in Great Britain as well as her former colonies are turning to outsourcing to get the job done.

ASPs Changing International Outsourcing

The burgeoning growth of the Applications Service Providers (ASP) is transforming outsourcing in all four corners of the globe. The ASP revolution is transforming who can use software. ASPs are even changing how software is sold.

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 through outsourcing.

Asia is embracing the ASP solution. Today, the ASP and Internet segments are the fastest growing areas of outsourcing in Japan.

The Europeans are increasingly turning to ASPs because they provide a faster adoption and implementation curve. Arriba 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 programs can implement itself.

Now 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.

I predict the unstoppable growth of ASPs will put stress on traditional outsourcing providers like CSC, EDS and IBM. These players are used to large contracts to provide these services. The fleet-footed ASPs are becoming a more effective medium to share the software. And they are the only way a small company can have access to these major programs.

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 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.

ASP Pricing Models

When an ASP takes over the entire process, the price changes from bandwidth and disk space to either per seat or per performance. This ASP model becomes more costly for the buyer because the ASP has to provide more infrastructure and take on more risk.

However, going the ASP route is more cost effective on a total expense basis because the client does not have to keep buying equipment to ensure there is adequate capacity or to search for staff to properly run the software.

ASPs have grown exponentially in the U.S. because of the need for their outsourcing services. Now the rest of the world wants the use of this tool, too. Eventually, maybe even the weavers in Guyana.

Lessons from the Outsourcing Primer:

  • Businesses in all corners of the globe are turning to outsourcing to help them compete. That includes indigenous people in rural areas who want to participate in e-commerce.
  • The Application Service Provider (ASP) market provides a cost-effective way for smaller companies to use world class software.
  • European countries and Japan are experiencing rapid ASP growth.
  • ASPs can get an application up and running in a hurry and certainly faster than if the conversion was done in-house.
  • There are two types of ASPs. One simply rents space on the server farmer in the old time-share model. The other assumes complete control of the process and is monitored through metrics.

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