Microsoft, Cable & Wireless and Compaq announced an application service provision (ASP) deal earlier this month. And, whether the user community likes it or not, it can no longer afford to ignore the ASP model.
Suppliers have been hyping application service providers for some time, but the claim that they are the future of business computing is gaining weight following a spate of industry giants rushing to sign ASP deals.
So what does a hosted service offer to IT departments?
Suppliers promise that it will enable users to escape the nightmare of support and upgrade difficulties incumbent in the client-server computing model. The downside is that applications have to be customised for the ASP model.
However, at the Citrix iForum 2000 last week, Citrix announced an initiative to allow independent software suppliers to embed its MetaFrame software in their applications, allowing them to be easily adapted to the ASP model.
"This is a horizontal solution," said John Glendenning, director of iBusiness Application Systems business development at Citrix. "MetaFrame will be the backbone for all applications, giving them the ASP capacity ready to go."
Application developers from the waste management industry to the legal sector have already signed up to use the technology in their vertical markets.
ASP iProvide has gone one step further, offering to take almost any in-house system and host it as an ASP with its iServe scheme. "It has been called soft outsourcing," said Tim Edwards, iProvide's business development officer. "We take over the hardware and software for the user, but we don't take the staff."
Marketing firm Opus signed up to use Microsoft Exchange hosted by ASP Netstore last December. "Running Exchange is no more core to our business than running a generator in the back office. We depend on electricity, it is just as crucial as e-mail but that doesn't mean we should run it in-house," a spokesman said.
IDC predicts that the UK ASP market will grow from £2.3m in 1999 to £215m in 2004.
"ASPs are nowhere near take off point yet," said Robin Bloor, CEO of Bloor Research. "But, ultimately, all IT user organisations will either become an ASP, an ASP customer or both."
The traditional model for selling software is changing. According to Bloor, previously users looked for a particular application. Now all they are interested in is the process, such as e-mail, or search engine, or billing. The technology is irrelevant. In future, users will be delivered these processes by ASPs via application portals that offer a personalised set of applications.
Many ASPs try to sell themselves by saying outsourcing applications in this way will dramatically reduce the total cost of ownership of the desktop. But Ashim Pal of Meta Group is not convinced. "The ASP premise is that it is magically cheaper than the standard desktop model," he said. "This is only true in a heavily standard environment. The thing about personal computing is that people have very different requirements."
However, the pricing structure for ASPs is not yet clear. When Microsoft, Compaq and Cable & Wireless announced their ASP initiative, they did not mention pricing. With the service due to go live in the UK in September, it gives users little time for long-term planning.
Some ASPs are looking to bundle other products with the application. FutureLink which has recently arrived in the UK from the US, will offer a complete package, including applications, ADSL connection charges and even rental of a Wyse thin-client access device.
But, despite this flurry of activity in the ASP industry, users are few and far between. The next hurdle for ASPs is to persuade user organisations to accept them.
One company to take the plunge is Bloor Research. It has been so impressed by the model that it is in the process of moving the majority of its IT to ASPs as well as renting some new applications.
Many experts believe the ASP model is the future of business computing. "It will offer a practical way for industry and business to resolve the anarchy of desktop computing," said Simon Moores, chairman of the Windows NTForum and the Java Forum. "Over the past five years, business has been obsessed by IT not business. This model will allow it to concentrate on what it is good at."
Case study: Bloor Research
Business and technology analyst Bloor Research is taking its own advice. In May, it began the process of outsourcing most of its IT to ASPs.
"We're completely persuaded that the basic model is sound," said Martin Brampton, operations director at Bloor. "Our business is not about running in-house IT. Our systems were becoming increasing complex, requiring a different expert for each one."
Bloor plans to outsource its Lotus Notes system and Microsoft Office plus a new accounting system and a new CRM system to replace an in-house application. It will carry on running its own Web site.
The main problem, said Brampton, is agreeing the contract. "Suppliers want the contract to protect them, they're wary of being tied down to something they can't achieve." Bloor expects its new set up to go live in July.
Key issues when signing with an ASP
Service level agreements
Who is liable if the system goes down? Bloor Research recommends users be realistic about what sort of availability an ASP can provide. The SLA should specify who is liable if your application is unavailable, whether it is the service provider, the application suppliers or the telco. But there are no formal standards in place. Different levels of service come with different costs.
Be clear about who will take responsibility for issues such as data security and integrity, as specified in the 1998 Data Protection Act.
Until broadband connections become widely and cheaply available the advantages of the ASP model will be limited.
Co-chaired by Uunet's Steve Vanterpool and the Research Group's Simon Moores, the ASP Community will launch on 27 June. It aims to educate organisations and end users about the benefits and pitfalls of the ASP model.
Chaired by Citrix's Travor Gruen-Kennedy, the Application Service Provider Industry Consortium has 500 industry members. It was formed in May 1999 to promote the ASP industry, set up standards and provide information to ASPs.