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Opinion -
Golden chalice or poisonous snake? (February2000)

Will the projected growth in Applications Service Providers prove to be of mutual benefit to all parties in the IT industry, or is there a sting in the tail? Mike Thompson takes a look at ASP.


This is it! The latest, newest, brightest acronym has arrived; ASP (which in this instance does not stand for Active Server Page – which has now been relegated to the acronym second division) or Application Service Provider is the new kid on the block, and it has arrived in no uncertain manner. All the talk about ASPs is a clear indication of how – with a bit of tweaking – something old can be made all shiny. Bright, and new. Application Service Provider; the hosting and delivery of an organisation’s applications – any Rip Van Winkles would think that we are talking about outsourcing of IT, and they wouldn’t be far wrong. What we really have is a more structured form of outsourcing – a relinquishing of a certain amount of control in return for perceived benefits. Perception, however, can be a tricky thing; it all depends on your point of view – that’s why it’s perception and not reality. In order to look at ASPs in a rational manner, it is necessary to consider the benefits against the possible risks involved, and make no mistake, there are risks.

A cynical view

It is a comforting thought that we now have all these nice organisations who no longer want us to create an expensive infrastructure, and to buy lots and lots of seat licences to run applications. These nice organisations are now going to do it all for us – just think of the savings to be made on IT staff alone, never mind the additional benefit of no longer having to listen to ‘techies’ telling us why we need to spend another 1 million to put right the stuff we have just spent 2 million on. It’s such a good idea that it’s a wonder we haven’t all been doing it for years. Has it really not crossed anybody’s mind that this wonderful new opportunity just happened to occur as there was a growing disenchantment with many vendors’ license-pricing policies? Now there’s real cynical, but let’s just take a moment to see what hosting applications means from a vendor point of view. Guaranteed revenue stream; that’s what it means. What was the purpose of introducing the licensing model in the first place? Guaranteed revenue stream. Do we perhaps begin to see some connection here?

A word of warning

I will now move from cynical to cautionary. There are some obvious benefits to be had from moving to an ASP, not least of which is cost-saving, especially in management terms. However, these services are not going to be provided without charge, so it is incumbent on organisations to do their sums carefully. Included in these arithmetical calculations should also be some what-if scenarios. What if the level of service – which should of course be backed up by Service Level Agreements (SLAs) – does not come up to the expected standard? Even with the most tightly constructed SLAs, there are always going to be grey areas. If redress for a failure – or perceived failure – needs to go to litigation, then are system management costs going to be replaced with legal overheads?

The whole issue of SLAs is a thorny one, as part of the delivery process will involve parties that are not involved in the SLA, and what a recipe for disaster that could be. The levels of expectation on availability and response times are also likely to be set too high from the consumer point of view, and too low from the provider side of the fence; the amount of horse-trading that is likely to be necessary before agreements get written up is going to impact severely on time-to-market. Another concern is that the one-size-fits-all model that is currently in operation, may become degraded as the take-up of these services starts to increase. There is no guarantee that some ASPs might provide a premium service, leaving the ‘ordinary’ user to pick up the dregs of the available bandwidth.

Taking back control

One final area which I believe needs careful consideration is the ability to take back control if things do not happen in the way forecast. Once an internal infrastructure and management service is allowed to decay, how easy will it be to move anything back in-house? All pretty negative I’m afraid, something that may have been brought on by the grey skies and the mood of the moment, or it might have been that my experience shows that, in business, there are very few genuine win-win situations, and even with the few exceptions there is still somebody who wins more than the other participant.

There is little doubt that over the coming years this model will find much favour, and that many of the concerns I have raised will be met and dealt with to everybody’s satisfaction. There are many positive aspects of the ASP model – as vendors are more than happy to point out – but it should also be remembered that according to Shakespeare, Cleopatra died after clutching an ASP to her bosom.

Mike Thompson is Director of Research at Butler Group