While it is still possible to identify a distinct market for
outsourcing AS/400 systems, we have previously reported a trend for
third party management providers to take on networks and satellite
platforms surrounding an AS/400 installation as well.
And the evolution of the traditional outsourcing market towards the
application service provider (ASP) model was also observed. Here, a
third party hosts the customer's applications, and provides the
infrastructure as well. As the year has progressed, however, it is
now clear that the ASP option will rapidly prove popular among
AS/400 users.
Even though the ASP concept has not been around long enough to
benchmark its execution over time, the appeal of predictable cost
models, more effective IT and other benefits are as appealing to
companies running the AS/400 as those operating any other
platform.
Evidence of the opportunities available to ASPs working in the
AS/400 space is now apparent. For instance, outsourcing specialist
Syan has seen a rise in interest among AS/400 users regarding
outsourcing in general, according to George Djuric, managing
director at the company. He also sees the ASP side of the business
as being important in the future. This belief is supported by the
£3m invested by Syan in a data centre based at Hortonwood, which
Djuric says is being set up to support the key requirements behind
ASP activity. He further reveals that the company is in direct
talks with application providers regarding ASP hosting services,
and that Syan sees this side of outsourcing as contributing much to
its bottom line.
Despite the infamous Year 2000 lockdown on systems - with the
AS/400 implicated in particular - Djuric reckons that the
outsourcing business has not been as affected as other areas, such
as programming services and consultancy. And set against certain
indicators at the start of the year that the AS/400 outsourcing
market overall is not vibrant, Djuric now depicts a different
situation six months down the line.
'AS/400 outsourcing continues to be an active sector. Now that
the Y2K dust has settled companies have resumed normal operations
and this includes reviewing the IT infrastructure. There are still
a lot of AS/400 sites that could benefit from the services provided
by outsourcing companies,' says Djuric.
In addition to this extra business that can be derived from new
AS/400 outsourcing deals, Syan is also sticking to its policy of
accommodating other systems used by user companies alongside the
mid range platform. Windows NT and Unix both figure strongly in
this respect, while Djuric describes supporting desktop services as
giving 'a significant boost' to Syan's business. In Djuric's view,
all this underlines the importance of providing a responsive
service - based on individual company needs - and follows a growing
trend for AS/400 outsourcing customers to seek a similar managed
service for other elements of their IT base. It seems that the
users genuinely believe that a third party specialist will run
their systems more productively.
Further proof of the potential for applying the practice of ASP
to the AS/400 market comes from a recently formed company focused
on the sports market. Software4Sport incorporates the company
previously known as Computer Software, which sold the Talent
ticketing, marketing and merchandising application aimed at
companies behind sporting interests, such as football clubs. Among
the existing Talent user base are Chelsea, Newcastle United, and
Sunderland from the FA Premier League, as well as Greek club
Olympiakos and the Football Association of Ireland. CSL has also
built up business within other sports, like cricket and rugby.
The goal is for Software4Sport to be floated on the Alternative
Investment Market (AIM) and raise £3m through institutional and
private investment. The proposed valuation of the company will make
it a £13m enterprise. The additional funds will go towards further
developing an international aspect to Software4Sport's ASP
services. And clearly the recently re-branded company has already
impressed the typically conservative venture capitalist community
in the UK. Funding has been forthcoming for the erstwhile CSL over
the last few years from the NatWest IT Fund and Elderstreet
Investments - whose chairman Michael Jackson also fills the same
role at accounting software supplier Sage and is acting as
non-executive chairman of Software4Sport.
The company plans to offer a broader set of services and work to
a completely different pricing model, according to Bill Hughes,
marketing manager at the company. And it has already provided an
ASP service for a sporting event, namely the 1999 cricket World
Cup, where all the selected county grounds around the country were
linked into the same system. Hughes states that advanced
discussions are underway with partners to set up application
hosting deals, and provide internet connectivity to a centralised
system.
While larger sports clubs made up the typical CSL user base in
the past, Hughes sees a different profile for Software4Sport's
customers. A fully-fledged ASP model will allow the company to
shatter the current critical size barriers that exist. This ASP
service provision for sport will be operated on 'pay as you go'
basis, removing the need for large up front costs, and the often
burdensome contracts that persisted in the older outsourcing
market. Professional, semi-professional, and amateur clubs will be
able to use such a service, as well as arena and event management
organisations.
Talent has been sold to non-sports enterprises, according to
Hughes, such as the Calor Gas company. While such customers will
not be neglected, the market potential from sports organisations is
so significant that Software4Sport will be kept busy for some time.
And this means extending the overseas business expansion the
company has already achieved. Hughes actually describes the Talent
suite as customer relationship management (CRM) software, and has
been successfully sold to in-house AS/400 users for some time.
Hughes also praises IBM for its development of the AS/400 into what
he calls a 'high function web-enabled platform for our product', in
addition to stressing the capability of the AS/400 in terms of
supporting an ASP operation.
There is clearly enough commercial benefit to be had in the UK
outsourcing market for the AS/400 to provide secondary business
opportunities for companies previously operating in other sectors.
One such example is Safetynet - well known to many in the AS/400
user community as a provider of business continuity services.
In fact, Safetynet has been in the outsourcing business for
around two years, along with the cross-platform coverage the
company offers. Yet the AS/400 has not moved forward in this
respect as quickly as other systems supported, according to Phil
Lovell, development director at Safetynet. He finds this slightly
surprising, as the AS/400 is the mainstay of the company's customer
base.
Yet he points to contact with a number of prospective customers
to show that the outsourcing sidebar to the company's operations
could see an upturn soon. There is also a strategic deal with Syan
to consider, which sees the two companies working together in a
complementary way. Lovell therefore sees potential for developing
an ASP offering, although so far Safetynet has provided third party
management of operations rather than applications.
Lovell is keen to emphasise, however, that the company's
outsourcing business is growing quite well for platforms like Unix
and PCs. Like other companies interested in the AS/400 outsourcing
market, Safetynet also sees potential in large Domino groupware
implementations being put under the control of an ASP. One of the
plans IBM has for the newly refreshed AS/400 models is to support
well-integrated Domino solutions, as well as provide the base
platform for ASPs, among other areas.
On a wider front, the ASP market is starting to take shape. IDC
predicts the larger enterprise market for such services will start
to pick up nicely. The research firm sees large company adoption
rates leading to a $1.19bn high-end market opportunity for European
ASPs over the next five years. European high-end ASP spending is
projected to grow from $10m in 1999, reflecting a five-year
compound annual growth rate of 130 per cent to 2004.
In addition, the ASP Industry Consortium - founded in May last
year - has started the process of establishing best practices for
ASPs. This has been formulated in the May announcement of a 'Guide
to ASP Delivery Model', which is available to members of ASPIC from
the consortium's web site (http://www.allaboutasp.org). This guide
seeks to serve the purposes of both the elementary and more
advanced practitioner.
Yet concerns are also being voiced about the ability of ASPs to
deliver the promised levels of service, as has been revealed in
recent independent research (SEE BOX). One clear thing to emerge is
the need for ASPs. In an age of increasing skills shortages in IT,
and the fast rate of technology and business change, many companies
will not be able to develop their resources quickly enough to
maintain a competitive edge. Looking to a trusted third party to
provide key applications is a clear way to avoid such traps. l
The ASP sceptics
While larger businesses are ready for the ASP phenomenon, there
is some scepticism about the delivery of such services. These are
some of the key findings from independent research commissioned by
the Cedar Group, a services company specialising in knowledge based
solutions. The company asked Byline Research to poll 30
corporations about their plans for using ASPs over the next
year.
Released in April, the survey reveals strong demand but some
important concerns. More effective IT was cited by 83 per cent of
respondents as being the major benefit from ASPs, followed by lower
costs and higher returns as further attractions. Yet the research
also found that negative factors included a worry among 63 per cent
of the companies questioned about relying on a third party for
strategic resources, closely followed by doubts about quality,
reliability, security, and bandwidth.