Note To IT: Beware The ASP Hype

Larry Blackenship understands the benefits of handing over day-to-day application management to a service provider. The president of Digital Dog Media employed the strategy to help his fledgling Web design company get its start. He has frequently recommended that customers follow his lead.

But Blackenship's thinking changed recently. That's because Digital Dog Media was forced to bring in-house a key set of applications built on Allaire Corp.'s ColdFusion Web development tool. The application service providers (ASPs) that had been so central to the company's success could no longer get the job done.

"We went through three different ASPs and kept having trouble," he says. Those troubles included software upgrades that weren't completed in a timely fashion, long delays in fixing problem code, and a fundamental weakness in understanding the critical software on which the company relied. In fact, Blackenship often found his staff directing ASP personnel on proper use of server applications.

Blackenship's experience serves as a cautionary tale for any IT manager who gets sucked into the ASP hype. When ASPs have the technology wherewithal, they can free an IT staff from relatively mundane-albeit critical-functions, such as loading a new release of a server operating system. But when those technical skills are less solid, an ASP's failings can lead to huge headaches as application problems arise and simple requests go unanswered.

Since hosting and maintaining applications is a new breed of service, many providers don't yet have the core expertise to work through every possible hardware, software or network problem. ASPs have been teaming up to fill the gaps, but it's unclear whether the alliances will lead to seamless service and support, which users desire, or to finger-pointing, which they will have to referee.

Despite his difficulties, Blackenship hasn't completely soured on ASPs and still uses them, though on a more limited basis. Given his experience, IT organizations might consider setting thresholds on the complexity of projects that can be outsourced. Anything below the threshold makes sense to hand off. Anything near or above it should be managed in-house.

Corporate users are clearly embracing outsourcing. According to InternetWeek's 1999 Transformation of the Enterprise survey, 53 percent say they are outsourcing at least part of their Internet development efforts. Web design firms, application developers and Web hosting firms are all popular choices.

In response to demand by IT organizations, service providers that manage applications have cropped up en masse. Traditional ISPs have been at the forefront of this movement in a bid to develop value-added services to supplement their core bandwidth/access businesses, which are largely unprofitable. In some cases, ISPs are now giving away access.

The hosting services started by offering customers a building and a server on which to run Web applications, but they are evolving to support day-to-day business functions. ASPs that prove their mettle become virtual members of corporate IT organizations. The services are quite popular for Web applications such as electronic commerce. In many cases, dotcom companies want to devote all their IT resources to identifying new revenue opportunities or to serving customers, rather than making sure their applications are compatible with the latest browser.

Toysmart.com Inc. fits this profile. The company opened for business during the 1998 holiday season and was quickly deluged with customers. Its applications, which once ran on a couple of servers, now require more than a dozen.

The infrastructure expansion the company undertook has been smooth because Toysmart.com handed application maintenance to NaviSite. "We wanted our staff concentrating on ways to sell more toys rather than worrying about application maintenance, and our ASP helped us do that," says Bela Labovitch, Web development director for the online retailer.

Broadly, ASPs have outlined plans for delivering four types of service: e-commerce, which includes Web advertising and billing; office automation, such as e-mail and groupware; back-office systems like payroll, human resources and supply chain management; and vertical market-specific apps, in fields including legal, finance and real estate.

Thingworld.com also has an upbeat story: "If we weren't able to get hold of our ASP's systems technician at any hour, then we would find another supplier," says Andrew Collins, business development director at Thingworld.com. Collins, a NaviSite customer, says the ASP does a good job. Thingworld.com develops software "things," such as video clips from television shows, that Web sites can make available to PC users, who in turn can exchange them like trading cards. The things are designed to increase hits at company Web sites and heighten brand awareness.

IT managers must be cautious, or they may find themselves in a position similar to Digital Dog Media, extolling the virtues of ASPs while searching for one that can support their business apps.

Paul Korzeniowski is a writer based in Sudbury, Mass. He can be reached at paulkorzen@aol.com.