Ground Rules For Selecting An Application Service Provider

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.