January/February 2001

BY IAN WIDGER

The ASP market has seen tremendous change over the last year. The burgeoning industry has seen a flood of attention -- both positive and negative -- as businesses evaluate the merits of implementing outsourced and hosted solutions in their business strategies.

The value proposition that ASPs bring to the table is that by enabling businesses to outsource key functions such as data warehousing, Web hosting, and finance, they are able to focus on their core business. While the success of this model for traditional applications is still being determined, the telecommunications industry has begun to embrace the ASP model and apply it to traditional telephony functions like long-distance, voice mail, and call waiting. Outsourcing communications enables companies to move rapidly and deploy scalable, flexible communications systems quickly, with minimal impact on capital budgets.

Historically, corporate voice services have required lengthy implementation cycles and major capital investment in hardware for PBX and voice-mail systems. Infrastructure build-out and maintenance for voice services require full-time staffs that can cost large companies millions of dollars and make expansive voice systems effectively out of reach for smaller companies with limited budgets and manpower. Businesses also seek to be more productive. With the advent of high-speed Internet access and a growing desire for telecommuting options, businesses can provide flexible working environments and empower mobile workforces, but their voice systems can't keep pace. The challenge for businesses is to implement flexible communications that can accommodate a geographically diverse employee base, while keeping costs and time-to-use at a minimum.

Companies have begun to evaluate their existing communications infrastructures and to recognize the limitations on growth and speed -- even on revenue and employee retention -- that they impose.

INFRASTRUCTURE MAINTENANCE NO MORE
Faced with these demands, companies are increasingly turning to communications application service providers (CASPs) to solve their communications challenges. Businesses are seeing that outsourcing these services gives them a competitive advantage by allowing them to focus more heavily on growing their business. Industry analysts at the Gartner Group define these service providers as "companies that can provide the entire suite of telephony services as an outsourced service based on a pay-as you-go model." CASPs can provide a range of services from basic dial tone to PBX features such as voice mail, call forwarding, and call screening.

By shifting voice services from an expensive, on-premise, hardware-based function to a hosted, custom-built service, businesses can maximize their investment and realize new capabilities afforded by outsourced services. A successful CASP will host the essential services Gartner defines, but more importantly, will offer a broad portfolio of enhanced voice services that help evolve communications from basic business services to sources of productivity and agility.

The hosted solutions that CASPs provide will enable businesses to implement more intelligent and flexible communications business strategies. With robust, hosted communications, businesses can truly deploy a mobile workforce that can work effectively from multiple locations, yet never sacrifice remaining in touch with customers or colleagues. Flex-hours, telecommuting, and hoteling solutions become a reality with a hosted communications platform that makes employees accessible from any location. Hosted services delivered over an advanced network can meet business demands for increased mobility and provide them with the features they need to optimize their business communications.

THE CASP PACKAGE
Most U.S. businesses using an ASP are drawn to the model because of the cost savings and the freedom it gives them to focus on core business issues, according to the findings of a new survey commissioned by the ASP Industry Consortium. Enterprises recognize that in order to grow and succeed in today's highly specialized, fast-moving, global economy, they need to focus on their core competencies and streamline processes to gain speed and improve customer service. Communications and voice services in general are traditionally taken for granted and not viewed as strategic business services, but hosted communications are shattering that perception.

CASPs are stepping in to provide carrier-grade communications infrastructure and hosted voice services, as well as back-office billing and customer service support. They leverage network-based technology to eliminate the purchase and management of expensive, hardware-based communications, and enable businesses to deploy new services and applications rapidly, increasing the range and quality of service while minimizing operational costs. CASPs provide businesses hosted communications and voice services that can scale -- a platform for both immediate and long-term growth without additional capital investments. For example, two companies joining through a merger can utilize hosted services to seamlessly integrate their existing communications systems -- without purchasing new equipment or eliminating existing equipment. By offering scalable communications as well as back-office functionality, CASPs truly provide a complete communication solution.

Beyond cost savings and scalability, a CASP will provide businesses with a flexible feature set that enables them to meet their communications needs. A key driver for the CASP market, as identified by Gartner, is the need for a "service-creation environment (SCE) that allows the fast development and deployment of services." CASPs aim to provide the best in voice services and recognize that a flexible platform enables easy integration of third-party communications products providing businesses with targeted solutions that solve communications problems without additional infrastructure purchases or technology staff.

Back-office solutions such as billing and customer service are equally important for businesses looking for a total communication solution. Gartner also notes that "retail operators' billing and OSS will be critical to success." A CASP that can provide an end-to-end hosted solution will be able to meet the greatest demand.

As hosted communications gain momentum in the marketplace, it is imperative that businesses evaluate the technology and industry expertise that a CASP can provide. A CASP partner can quickly implement the communications capabilities a growing business needs, giving companies the freedom to grow or change without the barriers of traditional PBX-based systems. This shift toward hosted communications will provide CASPs the opportunity to redefine the existing communications landscape and create a new paradigm for business communications.

Ian Widger is president and CEO of AccessLine Communications, Inc. AccessLine is an industry leader in hosted voice communications, offering a full range of communication services to enterprises, new telecommunications companies and technology partners. AccessLine's outsourced communications services give businesses the agility they need to grow and compete quickly in the fast-paced Internet economy and the flexibility of expanded communications without ongoing capital investment. 

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BY ROBERT W. THRONSON

The telecom industry is under duress. With each passing quarter (of less than shining earnings reports), communications service providers (CSPs) endure dropping stock prices and furious shareholders. The erosion of commodity telecom services and the unremitting investments necessary to keep pace have spread them too thin.

CSPs have two choices: Either become low-cost commodity producers, which requires massive investments, or move up the application value chain by becoming a CASP, providing differentiated value to business customers.

Traditional CSPs had difficulty moving up the value chain. Their telco switches provided little value add. Years were required to deploy even simple applications like call forwarding. Furthermore, if a CSP wanted to deliver more sophisticated functionality, it was forced to buy additional proprietary call processing systems, integrate these systems, and then manage them. This was a costly approach and couldn't give their business customers what they needed most -- control over the application. CSPs required businesses to follow a provisioning process to change applications, which could take weeks to effect. So except for static applications, businesses have found outsourcing applications to CSPs unacceptable and have been forced to spend billions building in-house capability. As a result, CSPs have been relegated (for the most part) to providing commodity access and transport.

Fortunately, Internet technology is in the process of radically changing the communications industry. Now CSPs can evolve into CASPs, move up the value chain, and offer communications applications while giving the business complete control over the application. Applications can either be custom developed for the enterprise, pre-packaged by the CASP, or provided by a third-party ASP that has developed horizontal or industry vertical applications and needs a CASP to provide the communications infrastructure.

DELIVERING VOICE THROUGH IP
How is this accomplished? CASPs can use a wide-area, distributed, private IP network that connects service locations across the country (where telephone calls are received) with enterprise customer locations that implement Web applications to drive the handling of received phone calls. The model mirrors the Internet -- in which browser software on desktops connects with Web applications running on servers housed at the company. The call handling software that runs on distributed telephony servers connects with the business Web applications running on servers that can be either at the enterprise or hosted elsewhere.

The only difference is that with the Internet, Web servers emit HTML pages that drive the desktop software. When a CASP is delivering voice applications, the Web server emits XML pages. These pages conform to the emerging VoiceXML specification, and the call management software on the telephony server interprets them. For customer relationship management (CRM) applications, the CASP solution includes further integration with premise-based call routing software that implements the business rules of customer contact centers. This approach is what one industry analyst labeled "Centrex on XML steroids" -- allowing outsourcing, but leaving complete control with the business customer using open standard XML.

Using this model, there are three application areas in which a CASP can focus its business model and provide significant value. The first two focus on the end customer, while the third focuses on improving effectiveness internally within a business and with its partners:

1. CRM Communications Applications. Gartner Group estimates that over $40 billion is spent annually by businesses on proprietary premises-based equipment (e.g. IVRs, ACDs, PBXs, dialers) and on systems integration and management for CRM applications. The figure is projected to top $60 billion by 2003. Enterprise CEOs, CFOs, and CIOs have been forced to write these huge checks, as it was the only way their business could retain control of CRM applications -- outsourcing has meant loss of control. You can think of this as a giant dam, behind which $40 billion is poured annually.

Using distributed telephony servers under enterprise XML control, CASPs can now chip away and eventually detonate this dam and capture a large portion of the billions of dollars that executives dread spending on proprietary solutions. If enterprises can retain application control, pay only for what they use, and rely on a CASP to reliably deliver CRM communications applications in the network, then the enterprise will virtually always select CASP outsourcing over the nightmare alternative of building, integrating, and managing an in-house, complex proprietary system. Now CASPs can give enterprises all of the CRM functionality and control they want, without making them go into the telecom business for themselves.

2. E-commerce Communications Applications. Some of the bloom might be off the e-commerce rose, but IDC still projects it to generate $2.5 trillion in revenue by 2004. And e-commerce still keeps brick and mortar CIOs up at night figuring how to capitalize on Web growth. A huge CASP opportunity is to extend e-commerce beyond the Web to the communications device that is most frequently used -- the phone.

Some observers thought wireless application protocol (WAP) browsers would extend e-commerce to the phone, but the vast preponderance of phones do not have WAP. And to use WAP, consumers need to use that little screen to gather information or conduct a transaction, which is even more difficult when one is mobile.

How about the ability for e-commerce to be conducted on any phone, the way people are most familiar with using a phone -- by talking and listening? Speech recognition now allows e-commerce to be conducted in this way. This is the way we think e-commerce will be extended beyond the Web to mass markets.

According to Gartner, companies are currently spending $3.6 billion per year on Internet-enabled customer care to support e-commerce initiatives. This number is projected to grow to over $14 billion by 2002. As e-commerce becomes voice-enabled, expenditures will increase even more. Yet e-commerce companies will want to avoid the complex, proprietary road that brick-and-mortar businesses have followed for in-house CRM applications, which has meant buying proprietary telecom equipment and hiring staff to integrate and manage arcane systems. Instead, e-commerce companies would prefer to follow the Internet model and outsource delivery to a CASP that specializes in delivering mission-critical applications.

3. E-business Communications Applications. Here we are defining e-business as any enterprise that provides cross-functional and cross-organizational information and tools to enhance productivity and deliver competitive advantage. Today, many companies use tools such as Microsoft Exchange and corporate intranets for this purpose. Gartner estimates that e-businesses now spend $2.5 billion per year on Web/IP-based services to enhance internal and supplier communications, which will grow to $23.3 billion by 2003.

When it comes to voice communications, however, the advantages of e-business have not been available. Can you calendar a meeting with multiple parties over any phone? Can you get access from any phone to your personal contact information, and then place a call to a colleague? CASPs can use Internet technology to provide these and many other e-business applications through any channel -- Web, e-mail, or phone.

Add up the numbers and you'll see that businesses will soon be spending almost $100 billion per year on delivering CRM, e-commerce, and e-business applications. Communications ASPs are in a position to capture much of these expenditures by delivering applications in a reliable and cost-effective manner, while still leaving application control in the hands of the business. The billions that go to CASPs will be taken away from the proprietary premises systems that no CEO, CFO, or CIO really wants. For the first time ever, CASPs can give the "keys to the network" to businesses, giving them control, which was always the problem with traditional outsourcing. But not anymore!

Robert W. Thronson is a vice president at Telera, Inc. Telera is a voice application infrastructure provider enabling communications ASPs to rapidly and reliably deliver CRM, e-commerce, and e-business applications. 

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