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Call it what you like; it's an ASP.

Application services offered by "ASPs" have been much maligned and misunderstood. This is due to the complexty of the market ASPs must address, including small and large companies alike, and encompassing the traditional businesses of outsourcing, integration and support--as well as managed services, networks and even enterprise applications.

What is the ASP hype all about? We maintain it is about the creation of new, high-value service types that address underserved markets and provide economies of scale. Initially, the model has been an outgrowth of outsourcing and integration, and will look more like network services as time goes by. With a continued drop-off in financial speculation surrounding the growth of the Internet, defining a new value proposition is doubly important for services included over it.

The new value proposition must justify the infrastructure investment--in part through subsidies and in part, directly, by corporations--that is being made. ASPs are expected to redeem the fast-fading "gold rush" mentality of the dot.com world by delivering real value to paying customers.

Various investors and pundits have made bold statements differentiating a new form of "Internet business services," claiming these are something new, better and more appealing than the traditional ASP concept. The analytical term makes sense, but beyond the investment community, it may be too abstract a distinction to prove useful for customers. The real distinctions made by customers will be about quality of service (QoS), not about methods of delivery. Whether it's the Internet or leased lines, small or large customer, it won't matter. The most reliable, well-branded and marketed service providers will ultimately be known for their QoS, not for the technology they choose.

An enterprise of any size likely turns to service providers to ease some clearly felt "pain," as marketers call it. It's also likely this pain is articulated with a high level of sophistication and, therefore, enterprises will expect that service-level offerings like reliability and security will be high, before a supplier is even considered.

The ASP market is also about helping suppliers. Suppliers recognize that the most common distinguishing characteristic of successful ASPs in the small to midsized enterprise (SME) segment is their need to create turnkey, low-customization bundles. Although some aspects of "stateful" service delivery are limited, Internet-based services extend benefits to smaller customers by lowering the service cost and increasing configuration flexibility. At the SME level, turning away from desktop-management issues and relying heavily on an outsourcer is typically desirable for a number of reasons.

Many SMEs desperately seeking access to a better-quality computing infrastructure are educated customers. IT managers typically see out-of-reach applications as the rationale to take a personal risk and bet their jobs on an ASP. Some of the services that SME customers buy are basic--scheduling, contact management, and integration of workflows and business processes are examples.

SME buyers tell us that bundling or network implementation is less critical to the purchase--but their actions tell us differently. Most of the SME-segment application-service purchases follow close on the heels of a VPN implementation. The real significance of the Internet business model to many SME customers is in the network implementation. "Virtual private networks" are finding a new life in the IP space.

We spoke recently with several companies that really get the concept of VPNs as a key enabling application service--the "applications" include network management and security. MyCIO.com and Telensius are two ASPs with timely, state-of-the art offerings in the VPN arena. Their security and network-management services offerings leverage the flexibility of IP networks to be configured according to the needs of large and small enterprises, while minimizing client-side management overhead. This points to a common set of enabling services to both customer types. The differences are in the marketing.

Other Internet-delivery and SME services--like Sky Desk's backup service or Everdream's fixed-price computing--deliver the same enabling infrastructure services to small customers who want the same capabilities as large customers.

Although these companies are themselves compelling ASPs, they enable other ASPs to potentially bundle services to deliver enterprise applications. Configuring and selling their core service set is the first step. We predict that infrastructure for bundling these services for SME customers and large enterprises alike ultimately will be shared, not separate.

ASPs are all about giving the "little guy" the same buying power that big companies already enjoy. These services will share characteristics between some large and small customer segments. It may be too early in the ASP market to establish hard-and-fast rules for distinguishing what small and large customers buy. ASPs may level out some differences, and leave the distinctions for channel vendors, integrators and others to make.

We're boosters of the Internet ASP concept. However, we have to note that calling the offerings "Internet services" carries interesting shades of meaning to the suppliers who have interests in common, but it belies the basic fact that Internet services are services nonetheless.

To revamp their sexy image with investors and customers, ASPs might do better turning to a tried and proven model. Calling ASPs another form of "managed services"--a recognizable, popular and profitable networked segment--might fare better as a semantic twist on the one-size-fits-all term, ASP.
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Title Annotation:Industry Trend or Event
Comment:The application service provider market is complex, providers must address small and large businesses, and offer traditional services such as outsourcing, integration and support in addition to managed services, networks and even enterprise applications.
Author:Taylor, Bart; Taylor, Dan
Publication:Communications News
Geographic Code:1USA
Date:Jul 1, 2000
Words:853
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