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.