January 2000

Go To Sidebars:
[ASPs: The RBOC Tolls For A New Market]  
[Fax Services Enable ASPs To Meet Customer Requirements]

ASPs: A Tad Confusing, Yet Very, Very Promising

BY GREG GALITZINE

These days it’s impossible to pick up a magazine or search the Web without coming across the acronym “ASP.” While, as Jim Machi describes in this month’s Industry Insight, the letters can stand for anything from Associated Surfing Professionals to Arbitrary Software Plug-Ins, the ASP we are most interested in is the Application Service Provider.

ASPs DEFINED
What is an application service provider? There are many definitions, but perhaps the ASP Industry Consortium provides the clearest one. They define ASPs as follows: “An ASP manages and delivers application capabilities to multiple entities from a data center across a wide-area network.” Of course many variants can find themselves at home within such a broad definition, and so there are any number of types of ASPs operating today. So-called “pure” application outsourcers, Internet Service Providers (ISPs), Internet Telephony Service Providers (ITSPs), and Telecom Service Providers all play a part in this growing industry.

While no one can say for sure how large this market will be, some analysts point to a figure in the tens of billions of dollars as soon as 2003. Gartner Group of Stamford, CT, for example, forecasts the ASP industry will grow to over $22 billion in that time frame. While other analysts, such as Forrester and IDC have slightly less aggressive estimates ($21 billion and $16.2 billion respectively), all signs point towards tremendous growth.

Who are some of the leading players, and what are some of the potential applications in the ASP market? The two sidebars that accompany this article talk about the potential for RBOCs (Regional Bell Operating Companies) to generate new streams of revenue and the potential for fax to be a moneymaking ASP application. Jim Machi’s column (ASPs: A Better Way for Internet Telephony?) sheds some light on the potential for Internet telephony related services and the possibilities for vendors in that space.

And, as for the vendors themselves? The ASP market has the potential of becoming very crowded over the course of the next few years. Currently, industry giants such as Cisco, Microsoft, Oracle, Sun, and others are enjoying early success with their ASP initiatives. Other pioneers in this field include FutureLink, TeleComputing, and AristaSoft, all actively providing services to their customers. And that’s just a scratch of the surface: A quick scan of the ASP Industry Consortium’s member list reveals over 200 companies involved in this space.

HURDLES
But all is not roses in this developing market. There remain many concerns with regards to outsourcing critical business data and maintaining acceptable levels of service. The cost savings associated with outsourcing may not be enough in and of themselves to spur vendors to farm their IT responsibilities out to the ASPs. Fear of an insufficient security mechanism to protect a company’s valued proprietary information may be tops on the list of concerns. Ownership of that information becomes a thorny issue too, when for instance, a company might wish to switch ASPs for one reason or another. What safeguards need to be in place to prevent a slighted ASP from absconding with a database or two? And what of service level agreements? What procedures need to be in place to make sure the ASP provides acceptable levels of service? And how can these service level agreements be enforced? There are many questions that must be asked of an ASP before committing to any contract.

Still, the trend seems to be shaping up for application outsourcing on an ever-increasing scale. With analysts predicting huge growth for the ASP market, and vendors such as Cisco, Microsoft, Oracle, and Sun putting all sorts of muscle behind their initiatives, the future for Application Service Providers certainly seems bright.

BY MICHAEL MITSOCK

The environment of healthy competition that was supposed to accompany the breakup of the telephone monopoly has succumbed to technology’s swift evolution: An ever-expanding menu of technologically advanced services has made the more traditional telecom services into bargain-basement commodities. For this reason, long-distance companies have begun to offer local service while local carriers have begun to offer long-distance. Cable companies and the rest of the entertainment and media industry wait in the wings as everybody fights to provide Internet service in any number of ways.

Now throw into the mix the concept of the ASP (Application Service Provider) model. Essentially, ASPs provide software applications on a rental or pay-per-use basis. ASPs offer an excellent opportunity for Regional Bell Operating Companies (RBOCs) to add new value for their customers. By using inexpensive communications, browser, and other technology, RBOCs that become ASPs could offer rentable, highly functional, and often otherwise expensive suites of software or groupware to businesses to whom they would previously have been prohibitively expensive. Any business with access to the Internet or VPNs (virtual private networks) could rent the software they want, for as long as they like, at the precise level of use they need, leaving the installation, management, and maintenance to the ASP.

The potential market is hardly a small one. Applications for rent target a variety of customer segments including, but not at all limited to, current customers of RBOCs. Telecommunications solutions offered via the Internet can potentially be accompanied by applications that cover enterprise resource planning, e-commerce, and security. In essence, this enables RBOCs to expand their offerings to their existing customer base. It also affords them the opportunity to augment their customer base through the wide-ranging horizontal markets and applications available by ASP, including office automation, back-office products, and vertical markets such as legal, finance, and real estate.

Regardless of the chosen market, the key to success lies in seeking out applications with certain characteristics:

Low Total Cost Of Ownership (TCO)
Applications with the best TCO will have nimble developers, who can create, test, deploy, and update complex applications in a short period of time. Take a close look at the resource footprint. Can all maintenance and updates be performed while the database and applications remain on line? How well does the application expand or adapt to change? How versatile are the software components? Can they be re-used or recycled in new programs? And finally, which management and measurement tools squeeze the most from your bandwidth? The measurement tools are an important window to keep track of the pattern of application usage and to help set fees for use accordingly.

Absolute Reliability
ASP customers require 24x7x365 access to their applications.

High Productivity, Flexibility, And Speed To Market
Look for intuitive application environments that make it easy to create or customize an application as fast as the market demands it.

Seamless Web Implementation
ASP applications and services are commonly delivered through the Internet or VPNs. ASPs must be able to deliver business logic via a URL. Look for solutions that can be perfectly and quickly Web-enabled.

Scalability
The ability to provide access to ten — or ten thousand — users and handle sudden growth with ease is key to the success of an ASP program. Look for components that allow for scalability without degrading performance or substantially increasing maintenance resources.

Flexible Interoperability
ASP solutions will have to work any time, anywhere — sharing information and software components with any customer’s legacy data source, feeding information to any application or any user interface. Look for application servers that incorporate emerging standards such as EJB, XML, and JMS, or that have adapters that can accommodate non-standard languages.

Daunting as the task may seem, there is tremendous support to help potential ASPs navigate the waters and understand the value proposition of the ASP concept. The ASP Industry Consortium was launched to foster standards and articulate the benefits of the ASP model.

These initiatives are all part of the groundswell of support for what is clearly a fresh win-win model for customers and providers alike. The ASP concept, which analysts say is destined to become a leading trend in IT, can provide a vast incremental market source for partners such as RBOCs who are poised to take advantage of the leading edge. c

Michael Mitsock is vice president of the ASP Business Unit at Progress Software Corporation, where he is responsible for guiding the company’s worldwide ASP activities. Progress Software, an ASP Industry Consortium member, has created exchange programs that link resources, which help software companies to find, create, and enable ASP applications.

BY EERO TEERIKORPI

The trend toward delivering software as a service is certainly gaining momentum. Resellers and service providers are being transformed, software vendors are re-thinking their business models, and customers continue to look for better ways to improve productivity. The ASP model is poised for tremendous growth. Fax service is one of the best applications to fit into this new model.

Foundations For Fax
Ask most to describe the concept of “fax” and the answer is likely to be a “document received over a phone line.” But the essence of fax is the service. Businesses need to deliver documents to provide critical information quickly, maintaining the fidelity of that information to the original. This is what a fax service delivers.

There is a key distinction between a message and a document. E-mail works well to deliver a message. However, when maintaining the image of the document is critical, as in most business documents and forms, an e-mail message does not suffice. The need to preserve the structure, format, and content of documents is so powerful that tools have been developed to deliver documents electronically as attachments to e-mail messages. The Adobe Acrobat portable document format (PDF) is the most well known standard for this purpose. But the easiest and most common electronic document format is still fax. Today only the fax format bridges the world of paper, fax machines, and electronic documents.

What’s Changing
When considering fax primarily as a service to deliver a document, it becomes clear that there are better methods to send a document than using a traditional fax machine. In today’s Internet world, fax document transmission is being accomplished through servers that manage the delivery of a document so users can receive and manipulate those documents through computers at their fingertips. Fax servers are growing quickly in medium and large businesses.

However, automation of fax services through servers has only made sense for those businesses with the infrastructure, expertise and scale necessary to deploy a network fax server — until now. ASPs can now deliver fax services that will compete with and eventually replace traditional fax machines. Not only does this make sense for small businesses, but the benefits apply to medium and large businesses also.

Let The Customers Decide
CIOs are making the move to software services. Companies pay a per-month-per-user fee, but can save significantly in IT headcount and time-to-implementation. Further, they don’t need to add the equipment and maintenance for those systems. Perhaps the greatest advantage of software services is scalability — they are easy to add when business grows.

ASPs looking to develop their suite of services are finding certain vertical industries are prime targets. Health care and financial services are examples that will continue to use document records and need better ways to transmit, store, and retrieve them. ASPs can address these opportunities by delivering fax services.
Also, ASP service offerings for fax are primarily designed to deliver generalized document delivery that differs from some of the specialized fax service offerings of the past. With the appropriate model, ASPs can use a fax server to provide “many-to-many” service and not just “one-to-many” service that is typical of a service bureau for fax broadcasts. The ASP can further add value to the organization with inbound fax service and intelligent routing functions to minimize costs.

True Partnerships
Customers will evaluate and select only the leading ASPs that can deliver reliability, customer service, and expertise in the fax applications provided. To compete effectively, ASPs will forge lasting partnerships with innovative software companies to achieve a breakthrough in fax service offerings. This next year will open opportunities for partnerships between software companies that recognize these changes and ASPs that recognize the market need for fax services. 

Eero Teerikorpi is vice president of channel sales and marketing for Esker U.S. Formerly he was President and CEO of Alcom Corporation. Mr. Teerikorpi earned a Master’s degree from Lappeenranta University of Technology in Finland. He is on the Board of Directors for Esker and serves on many other boards for start-up companies in Finland