ASPs offer the advantages of a fully managed service that delivers application availability, security, and performance as well as remote access and the ability to extend applications to your suppliers and business partners.

As very few ASPs can provide all of the requisite components of end-to-end applications outsourcing, the typical ASP model is built on synergistic, pre-brokered relationships between the ASP and an ecosystem of partners that may include Application Infrastructure Providers (AIPs), independent software vendors (ISVs), networking equipment vendors, and systems integrators.  Together these players form the application-hosting value chain.

A recent report from IDC (1) discusses how ASP success hinges on pricing and billing:

?In order for the ASP model to work efficiently from a business perspective, the needs / demands of how end users want to buy solutions need to be aligned with the offerings of the ASPs.  These in turn need to be aligned with the business deals that partners are willing to offer.  If everything works in harmony, then the ASP model works.?

The basic ASP model is for the supply of applications over the Internet or a private network to customers using a pay-as-you-go model, in effect ?renting? the use of an application to customers for a monthly fee.  This fee is usually user-based, and there may be a low initial system fee.  Paying for applications in such a way simplifies cash-flow management.  The fees do not change much month-to-month because variables such as cost peaks due to upgrades are factored into the cost.  Small businesses can therefore afford big-ticket applications that would be too costly to buy outright and implement.  ASP clients also do not need to worry about operating system, database, or application user-licence fees and compliance because the ASP bundles all of the licence fees within the single monthly fee.

ASPs focus on selling, marketing, and customising applications to the business processes of the customer.  The ASP's core competencies include packaged applications, application architectures, and application business value and customisation.  The ASP is the single contact for the client for contact, control, and accountability for end-to-end service delivery.  Leveraged relationships with others in the value chain are therefore of critical success to an ASP. One of the key deliverables that ASPs promise to their clients is consistent, predictable service delivery and performance.

Before you make your decision to embark down the ASP route for your software application needs, you are advised to investigate the options thoroughly. Your first step might be to calculate the costs of your current spending on business software and related expenditure, arriving at a ?total cost of ownership?. This will provide a starting point for cost comparisons when talking to ASPs. Then decide which applications you require from the wide range available, and choose a supplier from among those offering the exact services you require. Many ASPs will be delighted to develop plans specifically for your business. Examples of issues that you should consider are cost and minimum rental period; how closely the application meets your particular business needs; the support available; and, importantly, your security needs. Many of these issues should be covered in the service level agreement (SLA) or contract that commits an ASP to a specified level and/or quality of service.

The service level agreement should cover the following issues:

- A specified level of customer support, e.g., from 0800-1800 working days to 24-7;

- Provisions for system and data security;

- A guaranteed level of system performance;

- Continuous system availability;

- The different levels of service cover, if appropriate;

- The designated contact person, should problems arise;

- The enforcement provisions, in case of non-performance.

Another important aspect in selecting the optimal ASP is scalability and flexibility, which are essential to maintaining an online presence in today's competitive marketplace.  It should be easy to migrate your servers to your hosting partner's facilities, and they should work with you to update continually your system to meet the growing needs of your applications and customers.  Through comprehensive planning for implementation, migration, upgrades and capacity builds, your hosting partner should give you assurances that your ASP solution will achieve the highest standards of scalability and flexibility.

As the Internet becomes more of a central forum for conducting business world-wide, it is increasingly becoming a target of hackers and rogue organisations.  Moreover increasingly sophisticated techniques have been developed for breaking into systems. 

The ASP client must be reassured that the hosting ASP has adopted a multi-pronged, multi-tiered security approach that provides robust security to all of their customers.  Every component must be secure:

- Physical Security: access to the data centre should use multiple forms of identification, and use to be made of CCTV, etc.;

- Network and Data and Access Security: all system management should be performed over a secure back-end network.  Only authorised personnel with administrative privileges should have access to the network.  To secure the network further, authentication and segmentation must be used.

With the expertise, shared resources, and extensive services available through a quality ASP, the advantages of this new business model become obvious.  It could even be said that hosting the applications internally represents a competitive disadvantage in that it requires extensive resources that can take away from running your core business.

By taking advantage of the benefits of ASP and by choosing the right provider, you retain control of your content and drive the most important parts of your e-business.

Next month's article will address specific cases of successful ASP implementation.

(1) Source: ?Partnering with ASPs: Licensing and Channel Strategies,? by Amy Mizoras and Stephen D. Graham, IDC, May 2000.