Upstart ASPs can be fruitful for IT
- By Johanna Ambrosio
- January 1, 2001
IT must ensure ASP strengths match their needs, and be confident that the
supplier can sustain a long-term relationship.
Choosing to go with a small or specialty application service provider (ASP)
can be a great option for any IT shop. Major benefits of letting another organization
host one or more specific applications for your company include faster time
to market; saving internal IT resources for anything that is truly mission-critical;
using capital-equipment budgets for projects that are more core to the business;
and, in some cases, saving money.
That said, there are some fairly significant issues and even some hurdles to
overcome. Everything you have ever learned about outsourcing applies here. This
is not just an app; it is a long-term relationship with a vendor.
The risk factors can vary depending on the specific application at stake. The
larger and more complex the application, the more significant the integration
and customization issues can be. Some ASPs are set up to handle integration
with key legacy systems; others are not. And some ASPs are more willing or able
to customize the application than are others.
For those reasons, the most appropriate applications with which to consider
going the ASP route are those that are more standalone in nature and do not
require a great deal of customization/integration with back-end systems.
All in all, working with an ASP "creates a very interesting way to acquire
software," said Stan Lepeak, vice president at Meta Group, a consulting organization
in Stamford, Conn. "IT should definitely explore the ASP option."
Still, Lepeak cautions that IT organizations "need to be careful to make sure
you're ultimately not creating more work than you're getting rid of. The burden
may outweigh the benefit."
Many IT groups already have productive relationships with ASPs. Most customers
to date work in small- or medium-sized companies, or are "dot.com" firms starting
from scratch and for which speed is of the essence.
Most of the larger companies have not really explored the ASP model, noted
Lepeak. "They're taking it very slowly. We don't see many of our clients using
ASP applications — we see them kind of sniffing around, but not actively buying
into the idea yet."
General Mills, the Minneapolis-based consumer foods conglomerate, is one exception.
The company is working with Wilke/Thornton, a Dublin, Ohio-based ISV and ASP
that specializes in consum-er data. Wilke/Thornton's Item Locator Service (ILS)
allows General Mills' customer service representatives to tell customers which
stores near them sell a specific item. It can also create a street-level map
for driving directions.
"These have been some of the toughest calls we handle," said Jodi Richardson,
systems administrator at General Mills. "When customers call us, they're frustrated
and feel we should be able to tell them where to buy one of our products." Before
ILS, it was not always a sure bet that a service rep could get the answer. This
led to frustration on both sides.
Before the ASP model came along, the application would not have been cost-effective,
noted Richardson. As a straightforward software package, it was too expensive
and difficult to use. "We tested it a few years ago, but a large amount of data
had to be loaded onto each person's desktop — it wasn't as clean," she explained.
"But once they packaged it this way, we became interested because we knew it
Wilke/Thornton gets consumer goods data from a supplier that taps more than
30,000 grocery, drug and mass-merchandise stores. The data is updated quarterly.
"It used to carry a very large purchase cost, but now we charge per-transaction,"
said Andrew Brewman, vice president of development at Wilke/Thornton.
The ASP setup also allows customers to integrate the application into a Web
site and keep their own branding. This is an important consideration for customers
like Bob Montgomery, webmaster at KXTV, an ABC affiliate station in Sacramento,
Calif. Montgomery works with about four ASPs that deliver services ranging from
the site's search engine to severe weather notifications. "Our goal is that
it look seamless when people go from our site to theirs," said Montgomery. "We
want all these services to have our look and feel." He said he makes sure to
do business with ASPs that can provide that level of seamlessness.
A major reason for going the ASP route, said Montgomery, is "broadly speaking,
it's hands off for us — it's one less thing we need to be concerned about. We
look at our internal skill base and concentrate on things that are core to our
vision. From there, we decide what we want to outsource and what we can afford."
Once Montgomery and his staff figure out something they want to outsource,
they generate a list of vendors that provide that service and begin doing their
homework. "I go to the vendor's site and keep an eye on it for a while to make
sure the technology is solid and that they're consistently up," said Montgomery.
Only after he is comfortable with how the site performs does he take it to the
next level — contacting the vendor and starting the ball rolling with price
quotes and so on.
In fact, the up-front work is the most important part of the whole process,
say those who have been there. Montgomery said he is convinced that his company's
good track record with ASPs is because "we've done our homework."
Meta Group's Lepeak agrees that "doing your due diligence" is critical to an
organization's success with an ASP. "You probably need to do more [of this up-front
work] than you would with a traditional software acquisition project," he said.
"Take the time to do it right and not jump into it."
At Koz.com, a provider of community publishing tools to newspapers and other
media outlets, the process included "looking for a top-tier financial ASP,"
said Erica Boisvert, director of finance and HR at Koz.com, Research Triangle
Park, N.C. "We selected QSP [Quality Software Products, Raleigh, N.C.] because
they've been providing ASP services for several years" overseas, said Boisvert,
and because "it's a public company, very solid." This was all above and beyond
looking at the features and functions in the application itself.
Other tips include, of course, contacting existing customers of the application
service provider, doing reference checks and hitting the relevant news groups.
When you start communicating with the vendor, make a note of things like how
long it takes for them to get back to you and whether contact is by phone or
E-mail. For example, if you are a phone person and all the ASP wants to do is
send E-mail, that might not be a fit between your culture and theirs.
Whatever you do, said Meta Group's Lepeak, "realize this is a joint effort
and be very clear about who's doing what."
Within five years, most observers agree, renting software from ASPs will be
a huge part of the industry. "The ASP category will get really big because the
complexity of the Web will continue to increase," said KXTV's Montgomery. "But
the era of having mastery over every area of the Web is passing; you just can't
have a staff big enough."
|Put your ASP under the microscope
An application software provider (ASP) is a vendor that hosts one or
more specific applications that you and your users access via the Internet.
The ASP may develop applications, or the vendor may resell a package or
suite that originated elsewhere. For the gray-hairs out there, think timesharing
with an attitude. ASPs typically charge a monthly fee ranging from $25
to $5,000, depending on the application. Sometimes there is a separate
initial set-up fee to, say, get your data or processes into their systems.
A growing payment option is per-transaction, where you pay the ASP a small
fee (typically $1 or less) each time the application is used.
Before committing to any ASP, however, you should ask the following questions:
- Are there start-up/set-up fees or a minimum commitment?
- What are your privacy policies? (This relates to information about
your site visitors and/or internal users.)
- How do you ensure the security of my data?
- What is your uptime guarantee?
- What is your network infrastructure?
- Will you customize this for me according to my specifications? How
much extra will the customization cost my organization?
- Who are your tech-support people, and what are their direct phone
- Can I have a free trial run?
- What work will my staff need to do to get this up and running? (Data
entry, for example.) What will you charge if you do it instead?
- How long does a typical installation take to get up and running?
- If there is integration needed with back-end systems, exactly who
will be responsible for making that happen? (Get a clear sense of what
the vendor's responsibilities are and what pieces, if any, you will
- What are your service and support policies?
- Who owns the software that you rent — can you make changes to it,
or do you need to go to another party?
- Where are the servers physically located, and what happens if there
is a power outage?
- If it is going to be a service or product available to your Web site
visitors, ask about the ASP's ability to provide log statistics and
other analytic information about that part of the site.
|Growing your own ASP
The Donor Network of Arizona is the state's official organization for
facilitating organ transplants. The organization screens potential donors
for medical suitability and submits basic information to the United Network
for Organ Sharing (UNOS), the Richmond, Va.-based keeper of the national
organ transplant waiting list. Recipient matches are based on a number
of criteria, including time on the waiting list, size, blood and tissue
type, how sick the recipient is and, in some cases, geography. Donor Network
also does tissue typing and other basic tests.
There is "an awful lot of data to collect and standards to adhere to,"
said Darren Patoni, Donor Network's IT manager. And with no off-the-shelf
package that fit the bill, Donor Network decided to create its own. Data
is now gathered from various sources and made available on a secure Internet
connection via a browser. "It's about sharing data to make accurate decisions"
that typically are extremely time-critical, Patoni explained. "People
are able to collaborate in ways they weren't able to before."
The system is so good that other donor groups throughout the country
have asked about getting it, said Patoni. So his organization decided
to answer the call. "In our field of expertise, it would be almost a shame
to not share it with others," he said. His group is now in the process
of putting the finishing touches on the package, which should be available
in about eight months.
As yet unnamed, the system will "probably" be provided in the ASP model
for a few reasons, said Patoni. "Most of the organizations that need this
system are non-profits with not very deep pockets. The amount of hardware
they would need to install it, and the staffing required, is probably
out of their league."
That said, he allows how becoming an ASP is "a unique perspective" that
he "didn't set out" to do. Patoni said he is gearing up for the "challenge
of balancing" Donor Network's internal needs with the service and support
issues required when becoming an ASP. One possibility on the table is
to turn the group responsible for the ASP portion of Donor Network into
a separate, for-profit arm of the organization. It has yet to be worked
out whether that separate arm will consist of existing IT staffers, people
yet to be hired, or some combination of the two.
|Nothing fishy here
The new fishing-permit system at the National Marine Fisheries Service
(NMFS) is humming along, thanks to a lot of hard work by both the government
agency and its prime contractor/ASP.
The NMFS is responsible for issuing the federal permits required to legally
catch certain species of protected fish, including tuna, shark, swordfish
and marlin. The agency also has an enforcement staff that patrols the
number of each species of protected fish taken from the ocean. Information
from the fishing-permit process helps the NMFS decide when to close the
season on specific species, as well as what limits to enforce for each
The problem was that "our old ways of doing things were not working,"
said Michael Fraser, former senior project manager for the permitting
system at NMFS, who now works with another government agency. The first
generation of the automated system, also outsourced, was built in such
a hurry that the architecture was "brittle and not expandable," he said.
So when new features and functions were needed, it was decided that the
old system could not accommodate the need without unacceptable delays
The NMFS therefore decided to build a brand-new system — a Web storefront
for permits. The agency chose AppNet Inc., a relatively new breed of company
that is part developer, part ASP and part consultancy, as its main contractor.
Based in Bethesda, Md., AppNet helped develop the permit application,
worked with the two major subcontractors (one for an interactive voice
response system, and another that handles customer requests and service
for the agency), and hosts the application for NMFS.
The NMFS can get into the system to run ad hoc reports using SQL commands,
but the fact that the application is run off-site is "transparent to the
user," Fraser said.
The new system, deployed in December 1999, allows a customer to provide
a credit card number and buy a permit online. The permit can then be faxed
or mailed to the customer, or even printed out by the individual. Old-fashioned
ways still work as well — customers can call in, fax a request, or send
a check and a letter to a lockbox.
The beauty of the system is that it "all uses the same database, so it's
all updated in real time," said Mike McEwen, senior project leader at
AppNet. This is important because field personnel rely on the system's
accuracy. For example, enforcement personnel patrolling the docks or boarding
a vessel can call in or tap into a password-protected part of the site
and enter the boat's registration number to see if it has a valid permit.
One of the reasons the agency chose AppNet as its prime contractor was
because the ASP has what Fraser describes as a software version of the
"Good Housekeeping Seal of Approval." The company is certified to Level
3 of the Capabilities Maturity Model from the Software Engineering Institute.
"It's a standard, and it means, among other things, that you have repeatable
processes," Fraser said.
Another key ingredient was constant communication — weekly staff meetings
and daily check-ins as required. "We had E-mail, videoconferencing, virtual
team software — we had all the tools and we used them," Fraser said. "But
I didn't micromanage them. I talked to them and trusted them to find the
technological solution. I asked them to give me options, trade-offs and
In addition, they set a realistic timetable and used RAD tools for lots
of prototyping, noted Fraser.
Finally, and no less critical, was that the agency made sure everybody
bought into the vision of what the system was supposed to do, said Fraser.
"We showed [AppNet] and their subcontractors a video about the fishery
and its political environment so they could understand why accuracy of
the data and high levels of customer service were important," he explained.
AppNet and its subcontractors also took field trips to see other parts
of the process.
The system has been so successful that Vice President Al Gore has nominated
it for a Silver Hammer award. The awards are given out annually to federal
employees whose work has resulted in more efficient and effective government.
"This project jelled like very few do," said Fraser. "It turned into
a peak performance team."