ASP Model Becomes Mainstream | Article

application service providerPeopleSoft eCenter had a very good year in 2001, enjoying a nearly 200 percent customer growth rate, reports Sanjay Katyal, vice president, marketing for PeopleSoft eCenter, an application hosting company that provides end-to-end hosting options, deployment, and application management for PeopleSoft products in the ASP delivery mode. “We’re seeing a lot of acceptance for the hosted method in all areas of our applications — human resources, finance and accounting, supply chain management and customer relationship management,” he adds.

Last year PeopleSoft noticed its mix of customers changed. It saw a surge in “up market customers,” those with revenues of $500 million or more. Start up companies, who had been the mainstay of the eCenter, built a hosted environment into their business plans from day one. But last year the bigger companies across many industries saw the benefits. “The ASP model isn’t foreign any more. The delivery model is becoming mainstream for the Fortune 100,” says Katyal.

Sagging Economy Boosted ASP Acceptance

Acceptance of the ASP model is also getting a boost from the sagging economy. “Today technology decisions are emphasizing cost containment. People are now focusing on performance based on return on investment (ROI) with a greater degree of granularity because dollars are more precious these days,” he notes.

Companies like a hosted environment because their costs become predictable. “Outsourcing allows companies to do more with less,” the executive adds. In addition, outsourcing forces discipline on the IT department by making the employees define the scope of their mission. In today’s economic environment, this kind of clarity is “increasingly attractive” to companies, Katyal adds.

He believes this economic rigor will continue this year. The continued focus on ROI will speed the adoption of the ASP model even further in 2002, he predicts.

A second trend Katyal noticed last year was an increased emphasis on security and disaster recovery, the fallout from September 11. Katyal says company executives ask him, “How are you protecting our important data?” He sees corporate security under continual attack, more from virulent viruses than terrorism. Companies are willing to outsource this piece because they realize that while it’s critically important, it’s not their core competency.

Lessons from the Outsourcing Journal:

  • PeopleSoft is experiencing increased demand from upmarket companies deciding to host PeopleSoft applications through an ASP model.
  • The increased focus on cost containment makes the ASP delivery model attractive because of the controllable costs.
  • Companies are worried about the security of their data after September 11. That worry is another spur to outsource the hosting of their applications.


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