The Numbers On The Blackboard Add Up For ASPs

By Raymond Angus

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The Numbers On The Blackboard Add Up For ASPs

Millions of school-age students around the globe toil ceaselessly each day over the irrefutable law of nature… “Mathematics is an exact science!” Unlike Medicine, in which its devotees are said to be still “practicing,” the configuration of numbers is not a matter left open to conjecture.† They attach themselves to one another in prescribed ways and translate into values that are unchanged since the cave dwellers barbecued dinosaur steaks.

Albert Einstein expressed his affection for mathematics. That oft repeated statement of the noted Mathematician left bemused students today an inflexible legacy and dictum… numbers will never fail you. The squiggly, little digits are unbiased, unambitious and unlikely to express any opinions. Numbers may be inflexible, but mathematics has served mankind well over the centuries.

Assemble the numbers.

Research on the Deployment/Hosting and Integration of Business Critical Information Systems through Applications Service Providers (ASPs) by Professor Wendy Currie has borne out well the value of numbers. The focus of her study covers essentially Europe and the famed Silicon Valley in the U.S., but soon the research will expand into Australia. She defines her work as “an overall view of the development of the ASP industry.” Professor Currie is with The Department of Information Systems and Computers at Brunel University in Uxbridge Middlesex, Great Britain.

Her research includes ASP models of many areas and focus, such as enterprises, vertical, horizontal and ASP enablers. “The purpose of the study is to define how different ASPs handle, integrate and enable/manage their services and operations,” says Currie. The traditional outsourcing model has been based on one-to-one services: vendor to client.†

The new ASP model analyzes how the present application applies in the relationship involving many clients and a single vendor. The new arrangement separates itself from the traditional outsourcing relationship between vendor and buyer. It curtails the development of custom services, the hallmark of outsourcing in the past. It promotes standardization of services delivery, a “trade off” that reflects the growing needs of the marketplace.

Traditional versus the new ASP

The traditional application was owned by the customer, it was customized, but in the new model, the application remains the property of the ASP. A subtle shift in terminology, but a major variance in reality.† “For example,” explains Currie, “an IT application installed in a customer’s business will not be the property of the company.† It will remain propriety to the ASP.† In other words it can be likened to a rental arrangement.”

A large-scale survey was sent out in the course of the study.† The questions were geared to evoke responses involving the benefits and costs of using the ASP model.† One question asked, “Do you outsource all or part of your information communication technology?” The target was more than 250 (SMEs) small to medium enterprises employing 50 to 150 employees. Currie found the answers coming back revealing. 48% responded they did outsource their needs in this area and 52% said they did not. Of those SMEs that did outsource, 62% said they selectively outsourced their information technology needs and 12% responded they outsourced their total needs in this area. She defines total as meaning a company outsourced 80% or more of their information facility.

Some of the respondents kept in house 21% of their IT needs. They hired contract programmers and maintained a relatively large in-house facility with equipment. Six percent responded they entered into a joint partnership with an outside supplier–a risk/reward arrangement.

SME Reports Results.

In response to the question “had your outsourcing increased or decreased over the last three years?”† 57% of the SMEs reported it had increased, and 39% said it remained unchanged and 4% said it had decreased. † Currie notes that the study demonstrates an increased outsourcing usage by SMEs.

The study numbers indicated cost and individual budget constraints were of significant importance in making the decision to outsource or keep IT in-house.† The question “have you ever heard the term Applications Service Providers,” evoked responses that surprised Currie. 70% of the replies from the SMEs answered yes…but 30% answered no, revealing that many companies have not even heard of the term ASP before.† “A great deal of education needs to be done by the ASP industry,” states Currie.† “As it stands now it is a very vendor driven market” There is a constant river of talk within the ASP community about the innovative changes in SLAs and new avenues of service applications, but this is the “tail attempting to wag the dog.”† Customers must become knowledgeable about the advantages of ASPs before they will seek them out.

What is an ASP?

As defined by the ASP Consortium:† An ASP manages and delivers application capabilities to multiple entities from data centers across a wide area network. Currie explains it as “a customer going to an ASP and asking for a human resources management application or a financial accounting application.” The ASP will probably have a relationship with an independent software vendor who may have written the software.† It must also have an arrangement with a telecommunications center for data service. According to Professor Currie, “Partnering is a very important component for the success of an ASP!”

The 7-24-365 component.

The mantra of the ASP industry is the 7-24-365 service concept. It is jargon for 7days a week, 24 hours a day, and 365 days a year…total service. The outsourcer must be available all the time and not just on a prescribed schedule, because customers demand it.

Currie feels the ASP industry is in a turbulent stage. It’s grown over the last year in a dramatic fashion, and many of the suppliers cannot deliver all the services required, or desired, by customers. She predicts a fall-out of many small ASPs, but a merger of others that are essentially narrow and vertical in nature. But educating the markeplace of the advantages of using ASPs is not only important–it’s vital…because the numbers add up.

Lessons from the Outsourcing Primer:

  • Each business must investigate the ASP concept to see if it will benefit them.
  • Not all ASPs are the same. Some may not have optimum capabilities for every situation.
  • Apply the 7-24-365 rule to the SLA. Down time is not an option to be considered.

About the Author: Ben Trowbridge is an accomplished Outsourcing Consultant with extensive experience in outsourcing and managed services. As a former EY Partner and CEO of Alsbridge, he built successful practices in Transformational Outsourcing, Managed services provider, strategic sourcing, BPO, Cybersecurity Managed Services, and IT Outsourcing. Throughout his career, Ben has advised a broad range of clients on outsourcing and global business services strategy and transactions. As the current CEO of the Outsourcing Center, he provides invaluable insights and guidance to buyers and managed services executives. Contact him at [email protected].

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