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Application Service Providers Stepping Up to E-Business Plate

By Louis Columbus (

 Delivery of applications entirely over the Web is increasingly becoming commonplace as businesses and consumers look to take advantage of the instantaneous Internet.  There are literally thousands of companies that are renting applications over the Internet, offering everything from Microsoft's Office Online and entire intranets accessible by browser to industrial-strength sales, manufacturing and core business applications from Siebel Systems, SAP, Oracle and others.

 The growth of the ASP Industry Consortium to more than 500 members is evidence of the industry's rapid growth.  Many companies both measure and forecast the size of the ASP industry including International Data Corporation, Forrester Research, Gartner Group, The Yankee Group and several other research firms including Ovum Research and Zona Research.  These research companies have varying approaches to looking at the market yet all agree that the concept of delivering applications over the Internet will grow rapidly over the coming three years.  

There is plenty being said about the ASP model today, and with good reason. For the software developer, the benefits of being able to provide continuous updates to applications without having to spend for shrink wrapped packaging, the opportunity to serve a large marketplace that is dependent on a browser only, not having to deal with the intricacies of an operating system and the chance to have ``streaming" releases of applications instead of large incremental blocks of functionality delivered at a single point in time all make the ASP model truly the wave of the future.  Taking all these benefits and adding in a greatly reduced cost of sales and the ASP model becomes a certainty for many emerging software companies. 

For present and potential customers, the one-to-many model for ASPs provides the necessary flexibility for scaling software applications as businesses grow.  As more and more companies have distributed offices, the capability of an ASP to provide this scalability is essential for assisting companies in their growth stages.  The concept of outsourcing information technology tasks is as old as the computer industry itself, and the ASP model takes the instantaneous nature of communications on the Internet and applies it to the distribution of applications. 

An Industry in Growth Mode

 Any industry growing as quickly as application service providers will experience growing pains.  What's been interesting to watch is how ASPs are reacting to the challenges of growing their businesses.  First and foremost, customers are actively driving what products will look like in generations ahead.  It's because these early adopters of the ASP model are being proactive and defining what they need in terms of scalable solutions.  The impact of early adopters is unmistakable in the ASP arena today. The good news for companies participating in e-business initiatives with ASPs is that their focus is getting reflected in the ASPs' products today. 

There's also the issue of security and having data stored in a safe place. In response to this critical need of both companies and individuals using ASPs for security, virtually all the ASPs are using hosting companies with expertise in security, safety of data and ability to weather natural disasters.  Exodus Communications is considered the premier hosting provider for ASPs in the industry.  It has a core competency in security engineering, which is the study of how to make hosting systems secure. 

There's also the issue of responsiveness and speed as it relates to both applications being delivered and the responsiveness of the ASP in serving customers.  On the first topic of network speed, more often than not ASPs have Web site designers and developers on staff who are acutely aware how slow complex Java applets are to load, and the impracticality of having sweeping vistas of the Hawaiian coast as the backdrop behind a technology-centric company's site.  The speed variations that are all too common on the Internet only serve to remind everyone that this great new technology is also going through growing pains.  The job of an ASP is to streamline Web sites and applications for the best possible performance.  On the issue of responsiveness, that's where the service levels offered by ASPs truly show their level of commitment to their customers.  Many ASPs, especially those serving small businesses, are relying on e-mail addresses for contact points on service.  Several others are using live chat sessions that are very helpful, especially when staffed in the later evening hours.  

Enter the Small Business: Catalyst of Growth

 With small businesses being one of the highest growth areas of the economy, there are thousands of ASPs literally launching overnight to assist them in the development and launch of e-business strategies.  One of the most useful approaches to looking at e-business is to see how other aspects of the Internet relate to it. 

The term e-business refers to the application of Internet technology to streamline all aspects of business processes and is comprised of e-marketing, e-commerce and e-operations. Building an online presence, showcasing a company and providing detailed information is e-marketing.  The majority of small businesses on the Internet today are actively e-marketing.  The next level is e-commerce, which is the selling of products and services online, conducting payment, handling transaction details and supporting automated customer inquiries.  The third aspect of e-business is e-operations, the streamlining of business processes and taking steps to enhance business efficiencies between departments of a company.  This also includes streamlining the supply chain between your company and key suppliers.

Taken together, e-business = e-marketing + e-commerce + e-operations. The Yankee Group, one of the leading research providers tracking small business adoption of the Internet, has completed surveys of very small businesses (2 – 19 employees), small businesses (20 – 99 employees) and medium-size businesses (100 – 499 employees) about how they are using their Web sites.

Clearly to navigate the options in each area of e-business, a small business needs to have a person to speak with and take accountability for how their solution turns out.  There's also the need for checking into what other customers are saying about their experiences with any of the ASPs.  Checking references is just part of the process of looking into the ASP arena.  There are many other aspects to ASPs that you need to be aware of when you consider working with one.  At the very least, these considerations need to guide any outsourcing effort: 

1.      Service with an attitude.  The fact that ASPs are by nature service businesses that combine the latest technology with e-business applications highlights the need of having strong service.  Look for ASPs who provide service with an attitude–a strong positive attitude–of doing whatever it takes to make you successful at your e-business goals.  If you find a company with passion in this area customers will either be flocking there or very shortly behind you. 

2.      Find ASPs that can scale. Look for evidence the ASPs you want to work with can create Web sites that will scale with you over time.  Scalability is a big issue when having Web-based work outsourced.  Look for evidence of a company being able to scale with your needs as you grow.  This includes creating sites that can easily be modified as you change your messaging.

3.      Raving fans.  Does your ASP have customers who are strong fans?  If there is genuine enthusiasm for the ASP's performance then continue checking.  If you see nothing but ambivalence or unreturned voice mails and calls, be careful.

4.      Evidence of going the extra mile.  Does the ASP show it can go the distance for its customers and deliver a strong solution set?  Can the ASP provide not only the requisite e-marketing site expertise but also provide strong e-commerce and even intranet and collaborative support? Check to see if the ASPs you are looking at for your small business have the experience and have shown they can go the extra mile for the needs of their customers.

5.      Security Expertise.   In looking at the ASP arena the companies that will flourish will be the ones that have the strongest and most proven security available. Check to see if the ASPs you are looking at have secure hosting centers and processes in place.  

The era of delivering applications over the Internet has arrived.  Yet in the midst of all the technological innovation, there still exists the need of having a strong focus on the customer. Web site developers, telecommunication companies, software developers and even services companies are becoming ASPs. Those that will survive and thrive will be the ones that transcend technology with a strong focus on serving the customer more responsively, leveraging the Internet in the fulfillment of customers' goals. 

Louis Columbus is director, market research for and has written more than 12 books on technology-oriented topics, the latest being ``Realizing e-Business with Application Service Providers" with Macmillan Publishing Company.



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