IT directors' desks have been awash with pitches from application
service providers (ASP) over the past year. So it is worth
considering the technical problems these suppliers may face, writes
Danny Bradbury
For one thing, small software developers may not feel able to
offer the datacentre infrastructure needed to support an online
software rental customer base. Issues such as service level
agreements and system uptime become critical and, for a company
with no core competency in this area, moving into such services can
be a prohibitively expensive business decision.
As a result, there are many pure-play ASPs springing up with
experience in this area which are happy to host applications for
others. Companies such as Digica, for example, have their own
facilities dedicated to this purpose.
Perhaps more of an issue for potential ASPs is cash-flow. Unlike
conventional software sales, where companies get payment up-front,
online software rental entails a steady trickle of payment, which
will force firms to reassess the way they do business.
Some suppliers are sympathetic to this problem, especially those
that are heavily focused on the ASP market. Progress Software, for
example, which sells a database and development tool, launched its
Aspen programme in 1999 specifically for software houses wanting to
move into this area.
As the Aspen programme has developed, Progress has revamped its
licensing arrangements for those wanting to rent software over the
Internet. Now, it offers to take a percentage of revenue from ASPs
rather than insisting on an up-front payment. This will make it
easier for channel partners to get involved in the ASP space.
Other companies, including Sun, are taking an educational
approach to help small software houses move into the market. The
company runs a programme that consists of a number of seminars to
alert software suppliers to the business and technical challenges
surrounding the ASP market.
Additional reporting by Justin Wastnage
Issues to consider when choosing an ASP
- Does it have UK references? US figures, or endorsements
from US analysts may not be relevant to European
organisations
- Does it have the right staff? An ASP should have
high-calibre staff familiar with many technologies. Be sure the ASP
does not have a track record of poaching personnel directly from
customers
- Will it survive? An ASP should demonstrate a
well-defined business model and have access to extended lines of
credit. The ASP market has yet to consolidate, so the players can
expect to be squeezed as customers shop around
- Is the contract clear? ASPs should keep service level
agreement contracts simple. Key areas such as liability and
termination clauses and intellectual property should be clearly
defined. US contracts are often not compatible with UK customers'
due diligence procedures, which require contracts to be made under
English law
- Will it share risk? An ASP should be able to give you a
clear answer as to how much risk it is sharing. It should be
prepared to be measured against not only technical benchmarks but
your business objectives
- Are the system requirements clear? ASPs should detail in
any contract exactly what kind of connection the customer is
expected to have in place in order to receive peak
performance
- Is it secure? For ASPs, the physical security of servers
is an added consideration above network security. Many ASPs operate
from lower-rent areas than their customers. Also, consider the
risks of ASP staff having unauthorised access to user
data.