Application Hosting: Back to the Future.

Planning a comprehensive strategy for HIPAA, e-health and ASPs.

Predictable service levels, predictable costs, faster application deployments, reduced need for capital, reduced need for IT staff--these are compelling motivations to consider an Application Service Providers (ASP). But are its promises too good to be true? Where is the real value underneath the spin of an ASP? What strategies should be considered? Where are the "gotchas" and what about the future?

The ASP Industry Consortium defines an ASP as "a company that deploys, hosts, and manages access to a packaged application to multiple parties from a centrally managed facility. The applications are delivered over networks on a subscription basis and in some cases the ASP guarantees service levels." This model means that paying for large servers, tools for servers, server maintenance fees, hardened data center environments and qualified personnel becomes more predictable and less capital intensive. Service levels can also become predictable.

Servers in the Sky

The concept of having someone else host applications and provide them as a service is certainly not new. In the 1960s and 1970s, many healthcare institutions began having their financial applications provided on a hosted basis. They did this either because they could not afford computers or could not find qualified technical personnel.

During the '80s and early '90s, computers became more affordable and technical talent became readily available, so most healthcare institutions built their own data centers. In the late '90s, several major market trends began, which again created a compelling environment to move back to hosted applications.

The advent of the Internet started the trend back when it suddenly became cool gain to have "servers in the sky" providing information from remote networks. More compelling business trends included a worldwide shortage of qualified IT personnel, the increasing complexity of technology, the rate of change of technology, the need to derive business value out of applications quickly, lack of capital, and the need to have extremely high performance and availability service levels.

The network and data center technologies may have changed, but the business drivers are nearly the same as they were in the past. Analysts predict that by 2002, 40 percent of all applications will be deployed on a hosted basis. All of the major technology companies are moving swiftly to create new technologies and licensing models to support this trend.

Planning Strategies

So what strategies should be considered with ASPs and where are the "gotchas?" It is valuable to first formulate an overall IT strategy and to then look at what services a potential ASP is able to provide in support of the strategy.

First, consider the strategy. There is no shortage of good consultants offering to help healthcare institutions formulate a HIPAA strategy, an e-health strategy or an ASP strategy. Typically, different personnel are looking at HIPAA, e-health and ASP initiatives without realizing that, while there may not be much overlap in strategy, the actual implementations are tightly intertwined (Figure 1).

[Figure 1 ILLUSTRATION OMITTED]

These should not be looked at as separate initiatives. Making the mistake of going all the way to implementing these initiatives separately will prove to be costly and complex. Ultimately, it is imperative that the ASP is able to provide a robust network with many hosted applications and extensive connectivity to various e-health services, and can operate in a HIPAA-compliant manner in support of an overall IT strategy.

Next, consider the ASP services. What services is any company calling themselves an ASP really providing (Figure 2)? Most companies that define themselves as an ASP are providing a small subset of the services shown. It is critical to understand what is being sub-contracted to other companies and what is ultimately the responsibility of the customer.

[Figure 2 ILLUSTRATION OMITTED]

Also, understand what value-added services the ASP can provide that might further support HIPAA, e-health and other business initiatives. These may include e-health dashboard capabilities, connectivity to wellness information, access to CMEs, EDI to payors, handling tax files for the government, shipping statements to patients, microfiche production, transmission of payroll information to banks, links to prescriptions at local pharmacies, online scheduling applications for patients, personal medical records, and the list goes on. Next, look at the financial status of ASPs and determine whether applications and data can be trusted to their environment.

Complexity for Customers

Look at Figure 2 again and think about a future where connectivity might exist to numerous ASPs with each hosting only one or two applications and having its own mix of services it provides. Think about what responsibilities are left in the hands of the customer. The complexity quickly becomes clear.

Without a strategy to locate a very small number of stable ASPs that can host multiple applications and provide the bulk of the required services, the complexity of managing business relationships, networks, implementations and ongoing support remains in the hands of the customer. This defeats many of the major reasons for going with an ASP strategy.

So what's next? What can be expected in the future? There is no doubt that the shortage of qualified IT personnel will grow even worse. This is a worldwide problem and the large technology companies are paying premiums for good people. There is also no doubt that the complexity of technology will continue to increase. This will leave an ever-increasing gap between what is available and what most healthcare institutions will be able to assimilate.

Finally, wireless capabilities will continue to increase along with the wide use of palm-sized devices. All of these major trends will lead to top tier ASPs being able to offer even more value. Healthcare providers will enjoy having access to information anywhere at anytime on global wireless networks. IT departments will be able to utilize their limited resources to focus on strategic initiatives to differentiate their facility and to stop worrying about daily operations.

In 2005, global wireless networks will be pervasive and ASPs will provide applications on multiple network types to users across the globe. In spite of the many efficiencies and cost-saving advantages of the ASP model, it is still a model to adopt with forethought and planning. Ensure that it is part of an overall IT strategy that includes HIPAA, e-health and future wireless capabilities. Also ensure that the ASP is able to provide as many services as possible to minimize complexity. Once the right choices are made, enjoy the service levels and value that a top tier ASP can provide. The future looks bright.

Dan Emig is group manager of technology platforms and services marketing at SMS, a Siemens Company, Malvern, PA. Contact him at [e-mail].