National Life Group was unhappy with its IT supplier. It did not want to alert this supplier it was shopping, so its new supplier had a difficult time pricing the service since it could do no up-front diligence. Both buyer and supplier were surprised at the magnitude of the surprises. But they worked together through the difficult times, laying the basis for a successful future.
To paraphrase Mark Twain, the demise of ASPs has been greatly exaggerated. They are experiencing a remarkable resurgence, as enterprises small and large embrace their offerings. And one ASP, salesforce.com, just went public with the highest first-day price rise so far this year.
Application service providers (ASP’s) promise to make all this go away. Rather than pay large license fees and hire swarms of consultants, companies may rent the software, or buy applications by the drink, paying so much per user, per month. Applications will be delivered to the desktop, over the Internet. Just pay the money, and someone else will buy, install, connect and configure everything. The allure is plain, and has aroused interest in the marketplace, and from service providers, including well-financed startups, as well as such stalwarts as Intel and Oracle. The appeal is especially strong to new and smaller companies, who can adopt standard functions from popular packages more easily than larger, long-established organizations.
ERP deals are complex from a contractual structure and negotiation standpoint. And because many mid-market companies are just beginning to venture into ERP application territory, an area that until recently was reserved for large companies, mistakes are common..
You’re in the final stages of your outsourcing agreement. You and your outsourcer have worked out pricing, processing, staffing. Then up pops the devil in the form of third-party software licenses.
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