ARE ASPs FOR YOU?

• Author: McCarthy, Tim
• Position: Application service provider

As the trend toward outsourcing applications continues, so, too, will increased speed and overall cost savings. To uncover an ASP's true ROI potential, you'll have to conduct a stringent efficiency analysis.

The idea of the application service provider (ASP) strategy is simple but powerful: enable a company to enjoy time and cost-saving benefits without having to expand its internal information technology department. With today's economic conditions, the ASP strategy offers companies the rewards of best-in-class application functionality for a fixed monthly cost.

While the term ASP is relatively new, the concept of outsourcing non-core business concepts is not. Indeed, the explosion of ASPs in the past two years represents the value proposition more and more companies are embracing. Research and advisory firm Gartner Group estimates that the ASP market will grow from $1 billion in 1999 to more than $25.3 billion by 2004.

Industry-wide consolidations, advances in technology and the advent of the Internet have changed the way every company does business. And while sophisticated new software applications offer extraordinary opportunity for cost savings and competitive advantage, integrating the applications -- and the disparate systems often left over from mergers and acquisitions -- can be daunting.

One option is to do this in-house, but building or expanding business application information technology capability is an extremely complex undertaking. Internally hosting applications that require a large, ongoing investment in technology and personnel to update and run the IT infrastructure is both costly and time-consuming.

An alternative is to utilize an ASP to implement, integrate and host applications. ASPs provide buyers with access to the most popular applications addressing enterprise-wide needs ranging from e-commerce to customer relationship management (CRM) to enterprise resource planning (ERP). Through an ASP, software vendors price and package applications and related services and deliver them over the Internet or through dedicated lease lines. ASPs seek to speed implementation and minimize the expense and risk associated with the entire application life cycle, including acquisition, implementation, ongoing maintenance and upgrades.

ASP Selection Process

Selecting an ASP partner can be challenging. As the list of ASPs grows exponentially, with several hundred companies giving themselves that label, differentiating between them is...