ASPs

By Alan Gahtan - October 2000

The latest thing in e-commerce is the emergence of application service providers (ASPs) – companies that host, manage and rent software applications over the Internet. Instead of licensing software and paying for implementation and maintenance services, the customer “rents” an application which is run on the service provider’s system and accessed through the Internet.

Although portrayed as the “new new thing”, in many ways, ASPs are analogous to the service bureaus which were prevalent in the early days of computers. Back then, customer utilized a “dumb terminal” to access applications which were run on the host computers operated by the service bureau. Today’s dumb terminals are expensive PCs running web browsers such as Netscape Navigator or Internet Explorer. However, today’s applications typically utilize a graphical user interface as compared to yesterday’s character based, and less user-friendly, offering.

ASPs can provide access to e-mail, calendars, word processors, spreadsheets, time and billing, accounting, enterprise resource planning applications, customer relationship management tools, and more. You may have already utilized some simple ASP offerings without having given it much thought. For example, many portals, such as Yahoo, offer web-based e-mail, calendars and contact management applications. However, it’s the more sophisticated offerings (which are usually only offered for a fee) that are generating the most excitement.

Rentable software lowers investment costs, turns desktop applications in to mobile tools and reduces the effort required to install and maintain those applications. Another advantage is a much shorter implementation schedule as compared to over one year for the installation of a complex system (such as an enterprise resource planning application).

The ASP model also makes it easier to implement groupware applications where users may be located in different geographic locations or data that needs to be shared between users working at different companies. Because the software and data reside on the ASPs servers, the only tools required to access them are an Internet connection and a standard web browser (although, with certain applications, at least some “client-side” software must be downloaded an installed on the computer being used to access the services). Installing software patches and upgrades, and performing regular backups of data become a thing of the past. As a result, the ASP business is growing rapidly. International Data Corp. predicts that the $300 million spent on ASPs last year will grow to over $8 billion by 2004.

Another advantage is cash flow, particularly for large implementations. Conventional software implementations are loaded (financially) at the front end. Significant software license and implementation fees must often be paid in one big, indigestible lump. Also, with every upgrade, the customer must usually also be prepared for another large payment. In contrast, an ASP enables customers to spread the cost of the application more evenly over its useful life. The “total cost of ownership” may even be less because there are usually lower implementation and maintenance costs involved, and because the service provider can generally take better advantage of economies of scale.

While there are many benefits to the ASP model, there is also a number of drawbacks. The major is that if the user’s connection to the ISP goes down, there is no way to access the application or data. Comprehensive service level agreements are a must. Also, since the data is typically stored at the ASP’s data center, the ASP model may not be the best approach when the application needs to be integrated with, or data shared with, a customer’s other systems.

Another problem, depending on the application, could be speed. Unless users are connected to the Internet using high speed lines (such as cable modems or DSL services from the local telephone companies) or the applications are re-written to optimize their ability to run over the Internet, their use could feel frustratingly slow compared to locally installed applications. Security and confidentiality may also be a concern, particularly if competitors are using the same ASP.

Another disadvantage is that an ASP offering may be less customizable than an application developed on or at least implemented in-house. Some organizations will worry that they will lose the ability to differentiate their technology from that of their competitors. However, others take the view that their back end systems present less opportunities to create competitive advantages and that using an ASP provides them with greater freedom to focus on their core business competencies.

The following is a list of some of the vendors with simple and mostly free ASP offerings for those of you that may wish to become more familiar with the ASP industry.

www.microsoft.com - Office Online, a web-based version of Microsoft’s Office suite, includes Word, Excel and Powerpoint.

www.thinkfree.com - provides a complete office suite, compatible with Microsoft Office, but requires users to download a 10 mb Java applet. Users also get 20 mb of free storage space.

www.myfreedesk.com - offers a suite of word processors, spreadsheet and presentation programs as well as database, e-mail and chat programs.

www.damango.com - offers access to a Java-power desktop which includes a text reader, calculator, games and various tools.

Personable.com

© 2005 Alan M. Gahtan. All Rights Reserved | Use is subject to these Legal Terms
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