Managing your corporate applications in today's business environment can be challenging. Companies are continually investing in their application portfolios to maintain the high service levels that they need for daily operations and to anticipate future application needs. These demands can push even the most flexible information technology organisation to the limit. In the beginning software was undertaken in-house; it then moved to packaged solutions for the mass market; and the next step was outsourcing. Today, the Application Service Provider (ASP) model has emerged as a method of delivering e-business applications both efficiently and optimised for the end-user. ASPs provide a means for companies to e-outsource some ? or perhaps almost all ? aspects of their information technology needs.
A series of articles will be published over the next months addressing the multifarious aspects of the ASP value chain and the models is current usage.
More professionally, an ASP is a third-party entity that offers companies the ability to lease and access the software they use rather than purchase it outright. Software-based services and solutions are distributed to customers from a remote central data centre via the Internet or a private network. The software available covers a range of general and specific business applications, from word-processing to accountancy and payroll management, from managed messaging and e-commerce to human resources management, from data back-up to enterprise resource planning and healthcare. Charges by commercial ASPs are typically based on a monthly rental, per user (or ?per seat?), while a number of non-profit or government organisations may provide services to end-users with no fee.
Although the ASP market is still in its relative infancy, it is expected to experience significant growth in the next 3-5 years. For example, Giga Information Group forecasts that up to 75% of SMEs are likely to obtain their applications through an ASP arrangement in five years? time. Forrester predicts that the market for application hosting will reach $11.3 billion in 2003, representing a compound annual growth rate (CAGR) of 86%. Of this market, they forecast that over 90% of take-up clients will be SMEs.
Some clients wonder what type of applications could be accessed through an ASP, the answer to which is almost any. It all depends on your business requirements, from relatively basic elements, e.g., emails, to complex applications, e.g., an enterprise resource planning. Many of the increasingly popular business applications can be hosted over the Internet, via an ASP. A selection is listed below:
+ Financial management;
+ Electronic commerce;
+ Procurement and supply chain management;
+ Human resources management;
+ Managed messaging;
+ Information distribution;
+ Enterprise resource planning (ERP).
Although there is the opportunity for ASP uptake among large companies and consumers, the ASP principle is generally considered especially appropriate to small and medium-sized enterprises (SMEs). Having data processing performed off-site by a third party enables these companies to focus on the core elements of their business without being distracted by the need to support complex technology. Further, by eliminating the need for on-site support, maintenance and upgrades, ASPs have the potential to reduce the total cost of ownership significantly for smaller businesses and organisations.
The central idea is quite simple: take software applications, host them on powerful servers, and allow users to run the application directly through the browser software on their PC or other network enabled device. For corporate clients ? from the smallest start-up to the largest multinational ? this ?software as a service? approach offers real advantages:
+ Lower cost of management and operation, and financial flexibility. The ASP model reduces fixed costs, and lowers overall expenditure for hardware, applications and management.
+ Faster time to market. The ASP already has the equipment, applications and expertise ready to provide rapid market access. The typical 18-24 month implementation cycles for enterprise applications have become a thing of the past. ASPs often aim to deliver a standardised configuration, limiting levels of customisation, and thus reducing the time to go live.
+ Improved performance. The considerable experience built up by ASPs enables them to implement best IT practice in areas such as accessibility, security, back-up, and disaster recovery.
+ A viable solution for mobile, distributed workforces. Companies are increasingly dealing with workforces that need to access information from disparate platforms. ASPs can enable a company to provide all its employees, irrespective of location, with access to all relevant applications simply via a Web browser. Employees can sign on and work on the network remotely, thus reducing the firm's burden of maintaining a distributed computing environment.
+ Reduced risk. Relieved of capital expenditure on software, hardware and IT personnel, businesses can test a new technology with minimal impact on their existing environment and bottom line.
+ Focus on business, not technology. Outsourcing to an ASP, a company can focus on its core competencies, freeing up internal staff to work on these areas rather than on applications management.
Other obvious operational benefits for the company are simplified operations, access to the latest upgrades, generally 24-hour availability, and peace of mind as many ASPs provide essential business requirements such as back-up and virus scanning as part of their service.
Remember that running information systems for other entities is the ASP's primary business. With the staff, expertise and state-of-the-art equipment to maintain a reliable service, a carefully selected Application Service Provider can offer a cost-effective solution to the demands of systems ownership, providing your company with a viable alternative to procuring, implementing and managing complex systems itself. An ASP can enable your company to lower its total cost of ownership, and focus on strategy, not on software. Thanks to ASPs, applications traditionally reserved for the largest companies in the world have become more affordable and available to companies of all sizes.
Next month's article will address financial models for ASPs and Service Level Agreements (SLAs).