From TechWeb newsletter, 3/25/99

=== The Scoop ===============================

Ground Rules For Selecting An Application Service Provider

MIKELLE FISHER EASTLEY

InternetWeek

With the advent of network-hosted apps (applications that a company or

individual rents or leases from a service provider) has come the need

to identify, evaluate and select an application service provider.

ASPs combine software, hardware and networking technologies to offer a

service-based application as opposed to a corporate-owned,

corporate-run application. These offerings include enterprise resource

planning (ERP), collaboration and sales force automation tools as well

as Web hosting, e-business and e-commerce applications.

The ASP owns all or part of the infrastructure on which these

applications reside (some ASPs partner with other service providers for

some pieces of the infrastructure) and coordinates the various hardware

purchases, software licensing or development, and network connections.

Customers rent the services from the ASP on a per-user, per-month

basis. ASPs share costs among many customers, allowing for a much lower

cost structure than traditional solutions.

Because of diverse customer needs, ASPs target various customer

segments and offer degrees of service. Some ASPs package their own

software, hardware and systems integration. For example, USWeb/CKS'

E-Services Division (www.uswebcks.com) offers outsourced management of

Internet-based, entry- and enterprise-level applications for midmarket

and Fortune 1000 companies. Its offerings include e-commerce,

communications and knowledge management, customer relationship

management, and back-office solutions. USWeb/CKS develops its own

software, owns all of the infrastructure and manages all of the

networking issues.

Other ASPs partner with ISPs, system integrators and software providers

to combine strengths and offerings. USinternetworking, for example,

specializes in high-security, high-speed data hosting for

mission-critical applications. USi brings the total offering together

by licensing name-brand software and partnering with ISPs to get

network connectivity. USi takes care of all coordination efforts (so

that the customer only has to deal with USi), but does not own all of

the infrastructure and software.

Finally, some ASPs focus on a few target vertical markets, making all

of the hardware, software and integration choices that are right for

their customers. Corio Inc., a start-up, focuses on offering PeopleSoft

solutions to high-growth, midmarket companies. Corio seeks to engineer

out all of the risks that are practicable, taking responsibility for

end-to-end applications performance and customer satisfaction.

When selecting an ASP, you should examine several issues. First, you

want to look at your business needs and find an ASP that offers

services that match. Second, you should examine the providers' service

level offerings. Some of your business needs require high levels of

security and reliability while others do not. Finally, you want to know

what kinds of provisioning and customer support the ASP offers.

The ramp-up time may be significant, but many services are Web-based

and available immediately. Most ASPs offer 24-by-7 customer support,

but not all have high-quality support staff.

The network-hosted applications market is in its infancy, so IT

managers need to be careful about what selections are made. Many

offerings are still being negotiated customer by customer, so IT

managers need to establish solid, clear service level agreements with

the ASP, setting boundaries of responsibility and defining data

definitions and workflows.

This ensures that all parties understand what service is being

purchased and who is responsible for any problems that may arise. As

this market matures, we will see more systematic pricing and service

levels, but early on there will be many unforeseen issues. Be

scrupulous about service levels and customer support and make sure

there are no hidden costs.

Mikelle Fisher Eastley is a research associate at Northeast Consulting

Resources Inc. Direct comments to fmcolumn@ncri.com.