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Why ASPs

Outsourcing of applications is certainly not a new notion. In these pages, we've often mentioned e-mail and helpdesk outsourcing as viable alternatives. We've also issued RFPs for application services such as Web and e-commerce hosting. There's no doubt that many corporate customers are willing to turn over some of their applications to service providers. And, as it turns out, those who have dipped their toes in the ASP water consider themselves likely to go deeper into the pool. In a recent survey performed by our sister publication InformationWeek (see "Behind the Numbers: ASPs Make a Strong Impression"), ASP adopters (those who had already outsourced some application) said they'd continue down the path and cited ERP (enterprise resource planning), data warehousing, and their intranets as the most likely applications to turn over to ASPs.

That same survey found that ASP fans sought reliability, application-specific expertise, customer service and access to high-quality applications. These top four concerns speak to two separate factors fueling the ASP rage.

Reliability and expertise address the ever-growing pressure on IT organizations to provide more service with the same, or perhaps shrinking, budgets. Certainly everyone is familiar with the tremendous market need for qualified IT staff; IT managers at all levels will attest to the fact that finding and retaining highly qualified staff is becoming the No. 1 challenge. Addressing these two needs alone is sufficient for some organizations to consider using some sort of ASP-like service to host certain applications. The idea is simple: Take the most difficult ones to manage and give them to a company that guarantees it'll make them run right.

Customer service--especially in combination with a need to access high-quality applications--is the focus of a different sort of ASP customer. While any buyer of application services will demand good support, that requirement coupled with a desire to use an application otherwise out of reach implies that ASPs are opening new markets to the applications they sell. The 2,000 or so largest U.S. companies have been using back- and front-office applications, such as ERP and sales-force automation systems, for some time now. The midtier of the market, meanwhile, has not been so willing or able to fork out the big bucks necessary to buy, integrate and maintain these complex systems, often turning to shrink-wrapped systems that are far cheaper to buy and run. The vast majority of new ASPs specialize in providing best-of-breed applications to this sector of the market, or to the emerging dot-coms and other high-tech start-ups (see "Dump a Headache or Rekindle Your Biz").

Regardless of the type of company, we found that evaluating ASPs involves a number of critical criteria. As with any new type of service, you'll find a variety of vendors purporting to offer the same service but implementing it in very different ways. For example, some vendors are operating out of a garage, while others have signed deals with the best hosting services on the Internet. Caveat emptor.

In selecting an ASP, your first concern should be security. If you're going to trust someone to handle your financial, ERP and customer-relations applications, you darn well better make sure your data is in good hands. The ASP you choose should have a security officer, a written set of policies and regular security audits, and all audit results should be available for your inspection. Some ASPs go so far as to do background checks on their staff members who will have access to your data. Your ASP should be checking on you, too: Upon receiving a request for new users to access sensitive data, the ASP should contact your staff to verify the request.

Along with physical security and employing technology such as VPNs, firewalls and intrusion-detection software, ASPs must provide safeguards to ensure that each client sees only its own data. At present, virtually all ASPs do this by setting up each client with its own set of hardware to run provided applications, and the hardware is most often housed in the collocation facilities of a top-rung hosting facility. Hosting providers are generally quite proud of their facilities. You'll know if you're dealing with one of the good ones--they almost always insist on taking you on a tour of their facilities if you're near them. Be prepared to "ooh" and "aah" over rooms full of batteries and generators housed in bunkers.

To provide more aggressively priced services, ASPs will look to host numerous clients on the same server hardware. Particularly in a shared-hardware environment, be sure that your data is safe from prying eyes. Oracle, which is working on a technology to create virtual databases within a single instance of its software, and other companies are enabling their applications to support this type of configuration. Make sure your ASP is using software that explicitly supports different organizations if shared hardware is to be used.