Topic Paper
Exerpted liberally from How ASPs (Application Service Providers) Work
by Marshall Brain
http://www.howstuffworks.com/asp2.htm
“The terms ASP and Application Service Provider are applied specifically to companies that provide services via the Internet. In most cases the term ASP has come to denote companies that supply software applications and/or software-related services over the Internet. Here are the most common features of an ASP:
The ASP owns and operates a software application.
The ASP owns, operates and maintains the servers that run the application. The ASP also employs the people needed to maintain the application.
The ASP makes the application available to customers everywhere via the Internet, either in a browser or through some sort of thin client.
The ASP bills for the application either on a per-use basis or on a monthly/annual fee basis. In many cases, however, the ASP can provide the service for free or can even pay the customer.
Advantages of
ASPs
The ASP model has evolved because it offers some significant advantages over traditional approaches. Here are some of the most important advantages:
Especially for small businesses and startups, the biggest advantage is low cost of entry and, in most cases, an extremely short setup time.
The pay-as-you-go model is often significantly less expensive for all but the most frequent users of the service.
The ASP model, as with any outsourcing arrangement, eliminates head count. IT headcount tends to be very expensive and very specialized (like pilots in the airline example), so this is frequently advantageous.
The ASP model also eliminates specialized IT infrastructure for the application as well as supporting applications. For example, if the application you want to use requires an ORACLE or MS-SQL database, you would have to support both the application and the database.
The ASP model can shift Internet bandwidth to the ASP, who can often provide it at lower cost.
One thing that led to the growth of ASPs is the high cost of specialized software. As the costs grow, it becomes nearly impossible for a small business to afford to purchase the software, so the ASP makes using the software possible.
Another important factor leading to the development of ASPs has been the growing complexity of software and software upgrades. Distributing huge, complex applications to the end user has become extremely expensive from a customer service standpoint, and upgrades make the problem worse. In a large company where there may be thousands of desktops, distributing software (even something as simple as a new release of Microsoft Word) can cost millions of dollars. The ASP model eliminates most of these headaches. ”
Some of the applications that can be delivered this way include:
E-mail services
Search services
Database services
Portal services
Maintenance services
Statistical services
Security/Authentication services
What do you need to use it?
Very little which is its primary benefit. Up-to-date workstations connected to the Internet with the usual set of input/output devices would be required. A technical liaison within the organization is still required to work effectively with the vendor and users. Applicable client side software may also be required for some applications.
Prices vary according to the product purchased. The pricing model can also vary from a monthly/yearly license, to free (translation advertising) versions, to shared revenue models if that can be arranged. Pricing is typically size dependent which may be advantageous or not to WLA depending on how they count. (staff, simultaneous user, membership, etc..)
Things to Ask a Prospective ASP:
How do customers access the software? Is it through a browser or an application? If it is through a browser, how does the user experience feel? How are customer service issues resolved? If you (or employees) have questions and/or problems with the software, what happens? Does the ASP provide training? How secure is the data? You want to find out about internal security policies with ASP employees, passwords and access reports to protect your employees, firewall and other safeguards against external attack, and things like tape back ups to handle hardware failures. How secure is the connection between the ASP and the user? Data flows between the ASP and the user whenever the user accesses it. Is it secured by encryption, a VPN, proprietary techniques or some other system? How is the application served? Is your data on a dedicated machine or a shared machine. Both techniquesare common and you often have a choice (with dedicated service being more expensive). How does the ASP handle redundancy. If a machine fails or an Internet pipe goes down, what levels or redundancy are in place to keep your servers online? How does the ASP handle hardware/software problems? If a hard disk fails or the application hangs, what are the policies in place around recovery? How does the ASP handle a disaster? If the building were to burn down or a hurricane came through, how would the ASP handle the complete loss of the facility? How long would it be before service is restored? Who owns the data? Obviously the customer should, but this fact should be stated in the contract. How can I get the data out if I choose to select a new ASP two years from now? This is a tricky question on more complicated applications, and one that bears some thought for mission critical applications. How can I move data between existing applications and the ASP? For example, if you have a home-grown ledger system and want to move data back and forth to a billing ASP, how would that work? Many ASPs have already thought of this and handle it very well.
Being a small business operation with little desire for extensive in-house technical expertise, WLA is ripe to explore this business/technical model with a number of software applications it might pursue. Careful analysis will have to be made for any purchases that rely on a per use cost model to make sure that use would be adequate for the vendor and not be too burdensome for the membership. This might be helpful for applications that are only used infrequently for events, for office services that have an infrastructure beyond the capabilities of current staff, for member services that add value and can be cost justified on a per-use basis, or ones that can be promoted with vendors based on the size of our overall membership community.
Links:
How ASPs Deliver Value: Next Generation Portals for Business Applications
www.trginternational.com/HTML/giotto.htm
Apps-on-Tap - Software magazine article. (1999 article on costs)
www.softwaremag.com/archive/1999dec/AppsOnTap.html
ASP Portals
ASPIndustry.org - A consortium of ASPs
www.softwaremag.com/archive/1999dec/AppsOnTap.htm
ASPNews.com
SearchASP - ASP portal and search engine