September/October 2001
 

The Enterprise Market Wakes Up

BY RICH TEHRANI

It's no surprise that business managers have been skeptical of the benefits of outsourced services. After all, they have dedicated personnel and processes in place that have been operating on par for many years -- why rock the boat? But the same managers have realized that many operational processes are becoming streamlined in our continuously converging world, and a task that once required three full-time, specially trained workers and three expensive software licenses to operate and maintain can be hosted remotely for a less expensive monthly fee, and maybe one part-time administrator with basic knowledge of Web interfaces.

The prospect of personnel cutbacks brings up another interesting factor, and one that has also slowed enterprise adoption of these types of services. Where do hosted services leave the highly trained personnel who once carried out a specific task? It's a prospect that has caused many an IT Manager and MIS employee to scrutinize the ASP business model, emphasizing weak areas and de-emphasizing its inherent cost savings and efficiency. But let's face it: We're in the midst of an economic slowdown, and Fortune 500 companies are slashing jobs and laying off tenured staff members left and right. Where does that leave the remaining employees -- say, the highly trained IT staffers? It leaves them with two to three times as many responsibilities as they once had. And that prospect is making the ASP model look more promising than ever, to both technology workers and their managers, who are continuously watching the bottom line.

TAKING CARE OF BUSINESSES
The sheer number and variety of business functions that may be handled on a hosted basis is astounding. Communication systems are an obvious target based on this magazine's coverage, and immediately represent a cost-savings and personnel reprieve for small to mid-sized businesses. After all, why spend money trying to add functionality and scalability to an aging PBX when you can get your voice and data services through one access point, in a flexible and easily configured platform? Hosted communications solutions offer this type of functionality, from IP Centrex services to cutting-edge features like voice-activated dialing and directories to sophisticated unified communications systems for employee and customer messaging. But hosted communications systems are also beginning to represent an attractive alternative for large enterprises -- particularly those solutions that offer the flexibility of integrating with existing PBXs and LANs/WANs, while offering better functionality and easier administration and management.

The realm of hosted communications extends well beyond supplying converged telephony and data services, and this is an area where large enterprises are really beginning to see benefits. I've already mentioned unified communications, and audio and video conferencing can also be added to the list. Video conferencing has historically had a lukewarm reception in the enterprise realm, and expensive conferencing servers and slow connection speeds haven't helped its acceptance. But today's hosted multimedia conferencing platforms push those problems to the core, leaving the service provider to worry about quality of service, packet loss, and scheduling. In fact, many of today's hosted conferencing solutions offer on-demand scheduling, so businesses can simply plug in their logistics and enter a conference. And added features like collaborative Web browsing, whiteboarding, and application sharing make conferencing a great tool for the enterprise.

Mobility is also emerging as a critical tool for the enterprise, and hosted communications services can help push enterprise applications to wireless devices. Access to e-mails and voice mails are only the basic benefits mobility brings -- and the ability to sync with database applications and CRM platforms is showing just how valuable mobile devices are becoming in conducting everyday business. Not only do intelligent wireless services allow road warrior employees to check back with home base, but they allow businesses to support a permanent team of remote employees who are continuously in sync with enterprise-side operations, an ideal prospect for contact-center workers and outbound calling.

And beyond mobility, hosted communications offer tremendous benefits to the growing contact center. Today's platforms can replace the functionality of existing ACD, IVR, and knowledge management software very easily. However, they're also flexible enough to integrate with existing solutions, offering contact center managers a great path toward scalability and convergence with data and Web applications. For customer service, hosted applications offer perhaps one of the best solutions around, essentially because they enable so much self service, easing the burden on customer service representatives (CSRs) while offering assurance to customers that things will be done correctly -- since they're doing much of the work themselves. But even as a customer service contact mechanism, the hosted communications platform offers a number of options, from unified message routing to CSRs, to call buttons on Web sites that enable instant voice and text messaging over IP, giving customers the satisfaction of immediate service.

A QUESTION OF SERVICE
The list of hosted services that can aid everyday business operations goes on and on, from remote help-desk applications (see our review of DesktopStreaming for more information) to billing, ERP, and OSS services. The value to enterprises, both large and small, is exceedingly clear. But what about the drawbacks -- those problem areas IT personnel have been so quick to point out in discouraging adoption of the ASP model? The industry is certainly still experiencing growing pains, but in the short time we've been covering it, we've noticed massive changes in the way service contracts and quality issues have been handled.

First off, the service level agreement (SLA) has matured immensely. Long gone are the days when service providers drafted innocuous, vaguely worded contracts promising a basic service, but not clearly defining the parameters for delivering that service. Today's SLA contains guarantees for service and service delivery alike, and clearly defines what acceptable levels of downtime or lapses in quality (depending on the type of service) might be. It also contains provisions for both customer and service provider if the conditions are not met, and goes even further in defining the service provider's relationship with other service providers, who may be delivering one or more components of the service. All providers must meet their guarantees to ensure a quality experience for the customer, and the customer's customers.

Service providers are also better protected now, thanks to developments in security and privacy technology. And some are even carrying insurance, through a program recently introduced by the ASP Industry Consortium as well as other private programs. (For more information on these programs, read Laura Guevin's Hosted Exchange column.) Communications are one component of the hosted services marketplace, just as many vertical markets have emerged for these types of services, including the financial, retail, education, healthcare, and government markets. But hosted communications hold a great deal of promise for the enterprise, and education of their benefits and versatility is critical. After all, businesses are asking how they can cut costs and maximize their resources in an economic downturn. And ASPs offer a flexible and convenient way to do just that. The wakeup call has been made -- now it's up to the enterprise market to begin a wide-scale implementation of these cost-saving, resourceful services -- or risk losing more highly trained and valuable employees to the chopping block.

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It seems completely logical to me that the company that made enterprise, client-side computing what it is today would take the next big step and offer a platform for hosted, server-side applications, and even a hosted operating system. The .NET strategy will make the Windows OS and applications available over the Internet to PCs as well as handheld devices. It will enable users to access all their communications and information, regardless of what device they are using to connect to the Net. Extensible Markup Language (XML) is at the core of the strategy, and is also playing an important role in hosted voice applications. See our interview with Microsoft's Charley Pitcher for more information on how .NET will be used to deliver hosted communications.

Microsoft's success with the .NET platform will be largely determined by acceptance of hosted services in general -- and vice versa. My Outlook this month discusses some of the perceived drawbacks of the ASP model, and what service providers have done to assuage enterprise concerns over these drawbacks. I think Microsoft has the potential to play a key role in overall acceptance of the ASP model. After all, a majority of enterprises rely on Windows and its slew of business applications for most of their computing. If Microsoft begins to offer this technology on a hosted basis, won't they be likely to take notice?

Widespread acceptance will hinge on a number of provisions, not the least being the cost model Microsoft decides to use for .NET. XP pricing has already caused quite a stir in the industry, so I would guess Microsoft should tread lightly if they want to win existing customers over to .NET. The enterprise, of course, is the ultimate winner in the hosted computing strategy, just as the introduction of Windows and the applications that came with it changed the face of enterprise communications and operations. If Microsoft can get the .NET strategy off the ground in a timely and efficient manner, it has the potential to once again change the face of enterprise computing.

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