ASPs: A State of the Market: Page 2

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While the proliferation of ASP players is expected to continue for the short term, industry analysts expect to see consolidation over the next six to 12 months. In the meantime, potential ASP customers are left to sort out vendor confusion (see Industry Watchers Identify Four Types of ASPs sidebar). Who will ultimately be left standing when the ASP industry shakes out is anyone's guess. IDC's Mizoras has her own theory. The best ASP is the one that is great at partnering with players in all of the required disciplines for application delivery, she says, including network infrastructure, service and support, and application expertise.

In their respective searches for the necessary industry-specific application services, the Parson Group and Digital Foundry Inc. turned to Portera Systems. Both firms are professional service organizations (PSOs), which provide their clients with consulting services, and Portera, a vertical ASP based in Campbell, Calif., caters primarily to PSOs. Portera delivers its ServicePort suite of applications on a subscription basis over the Web. Key ServicePort modules include managing opportunity, resources, knowledge, engagements, and operations.

Industry Watchers Identify Four Types of ASPs
Pure-play ASPs, like USinternetworking Inc. and Corio Inc., of San Carlos, Calif., which partner with one or many independent software vendors (ISVs) to offer applications.

Software vendors, like Peoplesoft Inc. and Oracle Corp., which partner with pure-play ASPs but also offer direct application services.

Service companies, like EDS, which partner with ISVs to offer application renting.

Networking companies, like PSInet Inc. and Cable and Wireless PLC., which are becoming ASPs. In many cases, ASPs are also the clients of these networking companies.

Portera's ServicePort application services software is flexible and configurable to mirror our methods, says Susan Halicky, managing director at Chicago-based Parson Group, a five-year-old PSO specializing in finance, accounting, and corporate risk management. The company was clear that it preferred to turn to an ASP and focus on its core business rather than worry about getting software to work. We figured we'd leave the technology to someone else, she says. Using Portera's software helps Parson Group consultants track customers from the sales process through a business engagement, as well as get national views of consulting projects and clients.

After engaging in a vendor search process that began in February 2000, the Parson Group ended up with a short list of two viable ASPs, the second of which Halicky declines to name. We knew we needed a solution that was scalable, and even though Portera was a new vendor with a new software solution, we liked the quick software development cycle they offered on the applications we access, says Halicky, noting that major releases come out about every four to six weeks.

As a Web solutions provider and software development shop, Digital Foundry Inc. could have built its own project management and reporting application but opted to use its in-house technical talent on customer billings. Wes Stauffer, CFO and COO at the eight-year-old company based in Tiburon, Calif., chose Portera over some larger ASPs in September 2000. Portera's application suite is more closely designed to do what we need to do, he says.

Furthermore, Portera met the company's search criteria by providing a cost-effective functional application that was Web-based and had an interface that could be easily used by management. Most importantly, Portera offered a basic software package, featuring project management, project reporting, invoicing, and reports, that provides Digital Foundry with exactly what it needs without the bells and whistles. From a cost perspective, Stauffer says his company is paying half of what it would have cost to develop and maintain the application in-house.

To date, he notes that application availability has been very good. Digital Foundry has only experienced an occasional problem. Portera does an excellent job of notifying us when there is a problem, and we have a guaranteed response time in our SLA [service level agreement] when issues occur, Stauffer says.

Important Business Functionality

Like many companies that turn to ASPs, the issue of application customization came up for both the Parson Group and Digital Foundry. Customization was a major issue for us, and it's one of the things you give up when the application isn't truly yours, says Digital Foundry's Stauffer.

For example, he says he would set up the approval routing system differently if he were designing the application. However, given choices on how to configure an application, customers can make their instance, or version, have the look and feel of a personal application. It's a trade off that companies make when outsourcing, but we feel the time savings is worth it, Stauffer adds.

Digital Foundry Inc.'s Wes Stauffer likes the guaranteed response time from his ASP.

Parson's Halicky agrees. It's challenging when everyone shares the same code, but Portera caters to our business so we didn't require a lot of customization, she says. According to Halicky, Portera's software mimics processes in place at the Parson Group. The vendor also allows users to configure the application to their liking.

ASPs sustain their business by gaining economies of scale in application delivery and support, which puts limits on the amount of customization they can do. These limits allow them to support and implement applications more effectively. And while companies don't outsource their most mission-critical applications, they do turn to ASPs to deliver important business functionality.

According to Zona, customers currently utilizing ASP services are accessing a wide spectrum of applications, of which communications such as e-mail, messaging, and groupware are the most prevalent. Financial and accounting applications are the next most popular applications being accessed, followed by e-commerce, customer service/CRM, and education and training.

The demand for ERP applications or personal productivity applications, for example, is much more limited, according to Zona. Blatnick contends that ERP applications may be too complex for hosted access, while personal productivity applications may be better suited to a desktop or internal corporate deployment model.

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