ASPs: Another Service Problem?

Posted: 09/1999

ASPs: Another Service Problem?
By Deb Mielke

All the hype surrounding applications service providers (ASPs) has me more than a little befuddled.

OK, I do understand such things as web hosting, where the company itself controls the content and the service provider manages the hardware platform and provides the bandwidth; electronic commerce hosting, especially standard applications such as credit card verification; application outsourcing by organizations that have either done it before or have specific knowledge of a vertical industry and sales personnel who understand business application sales; and simple, useful services such as online backup.

I become confused, however, when service providers (Corio Inc., Santa Clara, Calif.; Digex Inc., Beltsville, Md.; Qwest Communications International Inc., Denver; USinternetworking Inc., Annapolis, Md.) send marketing messages suggesting that information technology (IT) organizations are going to utilize network-based business applications (BAAN, PeopleSoft, SAP, even Microsoft Office 2000) that have been mass-customized to meet the needs of "most companies, most of the time."

In the age of the Internet, where information is the key to market success, how can businesses accept mass customization of critical business application implementations?

For example, if a specific business process or implementation of SAP business software in an organization leads to a market differentiation from its competitor, why would a corporation choose to use a network-based implementation that looks just like its competitor's? Where is the competitive advantage? Isn't this one of the reasons that corporations migrated from time-sharing to their own hosts back in the 1980s?

Additionally, few service providers currently have sales personnel who can effectively market applications services. Most service provider sales personnel have been trained to sell one thing--connectivity. Applications services sales demand service provider sales personnel spend time understanding their customers' business and business processes--not something commonly done today. Does this mean ASPs will be hiring new sales overlay organizations, or just spending millions retraining their current sales forces?

What about version control and application feature implementations? If a corporation uses an ASP for Office 2000, is it forced to upgrade when the ASP decides, or can it wait until its business requires that upgrade? What if the corporation requires a new feature for its remote workers and the ASP decides it will not support that feature? Again, corporations migrated from time-sharing systems for exactly this reason.

Service providers currently struggle just to support network outsourcing (managed routers and other customer premises equipment). Order entry, provisioning and billing systems have proven problematic. Sales have been low. Customers have been frustrated by poor service, changing management and reporting. How do service providers expect to capably offer applications support (and end-user support for them) when network management services alone have proven to have low "take rates" and service levels?

Oh, and by the way, I recently returned from a speaking tour that was attended by more than 2,000 IT professionals. In a very unscientific poll, when asked if they were interested in ASP services, less than 1 percent of the attendees had a positive response. Therefore, I'd like to suggest the following to service providers interested in participating in the ASP hype:

· Focus on simple, useful applications such as web hosting, online backup, remote collaboration tools and credit card verification;

· Develop partnerships with experienced applications providers to help you deliver application solutions (Automatic Data Processing Inc., Roseland, N.J.; EDS Corp., Plano, Texas; IBM Corp., Armonk, N.Y., etc.) rather than trying to build them yourself;

· Prepare for delivering these services in the future (if they take off) by investing in the back office systems and support personnel you'll need later. Remember, if you want to supply applications services, you'll be taking calls for end users trying to figure out how to use a feature in Word, or access information supplied by SAP. That means new help desk personnel with new skills, requiring new software systems, on longer support calls;

· Start training your sales force now to sell value--not price! That means understanding the customer's business--not how many minutes he's using at what cost; and

· Understand that selling applications solutions takes time (and money). Sales and development cycles may take months, even years. That means investment and patience. If you're in a market-share battle, becoming an ASP may well distract you and detract from your ability to capture market share in the short term.

ASPs may well find success, and meet the market projections International DataCorp. (IDC), Framingham, Mass., recently has published of $2 billion by 2003. However, service providers would be well advised to analyze all their options before taking the ASP plunge.

Share this article: Email, Slashdot, Digg, Del.icio.us, Yahoo!MyWeb, Windows Live Favorites, Furl
Add this article feed to: RSS, My Yahoo, Newsgator, Bloglines