The idea of coming into work each day in a building that has only empty PCs and “thin clients”, all devoid of data or applications, where everything everyone needs comes down a wire from far away, is inherently disturbing – unless you really trust the wire and the provider at the other end.
This unease lies at the heart of the reason why application service provision, despite being hyped to the skies, has taken so long to catch on. A shoal of other concerns dart round about the concept, too. Fears over security, over ownership of data, over exit routes and quality of service guarantees, abound. But powerful as these worries are, they are contractual issues and can be addressed as such. The central problem is trust, and it’s a difficult matter to address.
Michael Winterson, chairman and CEO of IX Europe is adamant about this. The future of the application service providers (ASPs) rests on trust and confidence, and, right now, those are two commodities they lack, he says. Winterson’s company is not itself an ASP. IX Europe is a co-hosting company, which means it has a gigantic data centre it uses to rent managed, fitted and serviced space to all comers. But a number of Winterson’s customers are ASPs, so he has an interest in seeing their businesses flourish. So far though, “flourish” is not a word that can be applied with any deftness to his ASP clientele.
“We have to win the confidence of the corporate sector or we are all dead in the water,” he says. “It’s as simple as that.” It is not that things are not moving, or that no one is signing up. It’s just very slow. Winterson’s ASP clients each have a handful of customers, where they expected, by now, to be numbering them in the hundreds.
Perhaps it was always going to take a long time to bring about a fundamental shift in the way corporates buy their IT. Yet it could be argued that there is nothing particularly new in the ASP concept – to many, application service provision is outsourcing in a slightly different guise.
Bill Joss, executive chairman of 7 GLOBAL, which likes to term itself “an aggregator of business services” rather than an ASP, comes from an outsourcing background and has written books on the subject. He thinks a number of ASPs have over-simplified their proposition.
In every ASP deal there are infrastructure and server issues. “The ASP model has created a false expectation in the customer’s mind that you can pick a nice application, wing it down the wire and expect it to run properly,” he says. With 20 years of experience in outsourcing Joss says he can see glaring holes in that proposition – ASPs who take this route are dumping the task of solving infrastructure issues in the client’s lap.
In a proper ASP deal, the service provider should deliver a complete, end-to-end service, including site visits to solve any infrastructure issues at the client end. Moreover, Joss says, there is no point expecting one ASP to deliver e-mail, another to run the desktop applications, while a third delivers an integrated ERP suite.
“What a corporate wants from an ASP deal is to be able to outsource multiple applications through a single connection, with a single bill from a single supplier, and to have the whole thing underwritten by appropriate service level agreements,” Joss says. This, in short, is at the heart of the ASP aggregator idea that 7 GLOBAL offers.
The idea is that an aggregator will provide the data centre and infrastructure skills to bring together propositions from a number of application vendors that want to offer ASP versions of their products. In many ways this proposition is little different to the mainframe time-share services of the 1970s.
What has changed is that improvements in storage, connectivity and server-based applications mean that the ASP model is better able to address certain IT requirements.
“There were always two critical elements to the outsourcing proposition,” Joss says. “One was the definition and specification of the service, the other was the exit route: how you unwind the contract so the client can change suppliers.”
In his view, the ASP model is much better placed to address the first of these issues than its predecessors. ASPs can be very specific about what they offer and about per user or per transaction costs. This is one of their most powerful selling points, and the reason why the idea will have considerable appeal to FDs looking for a way of taming IT overspends.
This specificity may also, over time, as ASP services become a commodity proposition, solve the exit issue, too. When the customer has a choice of getting, say, e-mail or even an enterprise resource planning application, from a number of ASPs, changing between them becomes easier. It may never be simple to switch between providers of a complex application, but the fact that it can be done will bring competitive tension to the market and keep vendors honest.
Today, companies can draw comfort from the quality of the major applications vendors that are offering their products through the ASP channel. Microsoft, Oracle, SAP, and other heavyweights are all committed to the idea of delivering software on a “rental” basis. Moreover, we are also seeing some very large companies opening up shop as ASPs. IBM Global Services, BT Ignite and Cable & Wireless (C&W) are all expanding their data centre services to deliver a range of “down the wire” applications to corporates.
Craig Duffie, head of customer business strategy for Scotland points out that C&W signed a three-cornered deal with Microsoft and Compaq over a year ago, that committed half a billion dollars to developing ASP services.
“We are looking at the next generation of service delivery here. Microsoft knows the desktop market. Compaq knows the server and client side, and we know the network infrastructure and wide area network issues. We are all in this for the long term, to provide high quality services to businesses with all the appropriate service guarantees,” he says.
C&W’s model has a “per seat” payment basis, which gives FDs an exact figure to work with for basic applications, such as e-mail and desktop office productivity applications. In the next phase of C&W’s roll out, it will give them back-office and front-office applications such as ERP and customer relationship management (CRM).
Stuart Keeping, vice president of a-Services, C&W’s term for ASP, reckons the service will focus on companies in the 50- to 500-employee category, offering them an end-to-end managed service. This will include desktop devices, local area networking, connectivity to C&W’s data centre and, through C&W’s business partners, what Keeping calls “the real world delivery services to make sure that everything works”.
From the standpoint of a small- to medium-sized enterprise, the all-in per-seat price could prove a compelling proposition, particularly for a start up. Reg Smith, operations director at e-know.net, a manufacturing and distribution systems ASP, points out that one of the great attractions of the ASP model for FDs is that it is 100% off-balance-sheet. “Our process is service rental in conception.
There are no capital costs, and no one pays up front other than for implementation consultancy, if required,” he says.
Tucan Chatterjee, product manager for Exchange Services at the ASP, NetStore, admits that concerns over the reliability of ASP services persist. But building trust in the model is getting easier – there are already a number of ASPs who can point to years of experience.
For example, Netstore was one of the first ASPs recruited by Microsoft in the UK to deliver its Exchange e-mail and messaging platform. The company began life in 1996 delivering a remote on-line back-up service to corporates, which is still part of its service line up. And it has just launched a wireless addition to its Exchange e-mail ASP service, to allow corporate executives to get e-mails on their mobile GSM phones.
“We get people all the time asking what happens if it all goes wrong. It’s a fair comment, but we have a whole bunch of things in place to allay their fears,” Chatterjee says. Netstore, in common with other ASPs, can point to a highly resilient data centre with no single point of failure, with massive replication, and with an expensive storage infrastructure that most corporates would find it impossible to justify for themselves. “Microsoft put us through a very diligent certification process and we are BS7799 approved, which means we are trusted with third-party data. There are lots of things we can share with worried FDs to make them more confident,” he says.
Mark Gilliland, channel sales manager at Progress Software, which set up its Aspen (ASP enabled) programme in May 1999, points to the fact that large companies are now buying ASP services. “In 1999, everyone expected ASPs to be huge at the SME end of the market. In fact, we are finding that large companies are tactically accustomed to buying outsourced services, and they are now buying into ASP services,” he says.
A glance down any directory of ASP services will show that there is now an astonishing array of applications that can be bought on a rental basis. Doubtless, the usual crop of horror stories will eventually come to light, but the sheer scale, range and weight of the ASP option, as it exists today, means that FDs will begin to trust it. ?: