ASPs come in a variety of shapes and sizes

Sifting through myriad ASP offerings is leaving business users bewildered.

While it's easy to find application service providers that offer the exact same customer relationship management (CRM) or enterprise resource planning (ERP) application, it's not at all easy to decipher the differences between each ASP's service offerings.

The confusion is understandable. There are ASPs that:

• Let users retain ownership of their applications and those that don't.

• Team only with a single network service provider.

• Specifically target one industry segment or another.

• Make their application rental services available only through a Web site.

Business users clearly need a better understanding of what will and will not be included in any given ASP offering. However, because this is a relatively new market, ASPs themselves are still trying to define what they do, says Greg Runyan, analyst at The Yankee Group, a consulting firm in Boston. "There will be a certain degree of clarity emerging over time with ASPs becoming more focused, but there still is a lot of confusion," he says.

ASPs such as USinternetworking (USi), Qwest Cyber.Solutions (QCS), and Sprint and Deloitte Consulting's joint ASP initiative are trying to attract the largest base of business users. All are offering high-end ERP and CRM application hosting services and are not limiting their service offerings to the small and midsize businesses that until recently have been considered most likely to go the ASP route.

Analysts say these heavyweight ASPs may be able to offer systems integration and customization features that their smaller brethren simply don't have in place.

But while these three ASPs are going after similar business users, there are still some differences in their approaches. For instance, USi retains ownership of the applications it offers business users. USi hosts Siebel Systems, PeopleSoft, Broadvision and Microsoft Office 2000. Users who subscribe to USi's application hosting services are, in a sense, buying a subscription license that's paid each month along with their monthly application and server management and monitoring fees. USi is also one of the few ASPs that has built and owns its own data center.

QCS is also offering its customers high-end applications such as SAP's CRM suite. But the choice of application ownership is up to its customers. QCS lets its customers either come in with an existing SAP, PeopleSoft or Siebel license; buy a new license outright; or have the application subscription licensing fees included in their monthly bills. The third option will leave application ownership with the ASP. Sprint and Deloitte Consulting's recently announced partnership offers business users the same choices.

For some users, it may not matter who owns the application, because in all cases, the user owns the content. But users need to ask themselves how long they plan on staying with their ASPs. If a user signs a three- to five-year contract with an ASP and then grows quickly, outsourcing needs may change. Bringing that ASP application back in-house might then seem like a good idea, but it also might not be possible if buying a new software license is required.

Oracle Business Online, which is offering businesses Oracle's ERP and CRM hosted application services, always leaves application ownership with its customers. Oracle is taking this approach because it's going after small to mid-size businesses, which could see their outsourcing needs change quite a bit in just a few years.

"We wanted to offer customers the flexibility to take the application in-house in the future or take it to another provider, which is easily done if you own the license," says John Repko, vice president of operations for Oracle Business Online.

But what Oracle Business Online doesn't offer is application customization. While Oracle Business Online lets its customers configure their software, it doesn't allow them to change the source code of the application. This condition does not exist with USi, QCS or Sprint and Deloitte. In fact, Sprint and Deloitte are specifically targeting Fortune 500 companies, which typically do not deploy ERP or CRM applications without a fair amount of customization.

Customization for all?

Tailored services aren't necessarily out of reach for smaller businesses. There are ASPs that target certain market segments, primarily in the high-tech arena, offering predefined application configuration and customization.

Applicast, AristaSoft, Corio and Surebridge all target business users in specific industries. Applicast, which offers SAP and Siebel applications, is going after midsize companies in the manufacturing, software or high-growth Internet-based .com businesses.

AristaSoft and Corio are going after similar customers. Surebridge also has its hat in the high-tech arena but says it's targeting manufacturing and professional services firms such as advertising and public relations agencies, too.

"These ASPs have pooled all of their knowledge and developed templated versions of an ERP or CRM application," says Asha May, an analyst at Dataquest, a San Jose consulting firm. "If they can truly create best-of-breed configurations and customizations, then it will be an effective service."

To offer business users an added level of comfort, ASPs such as Applicast, AristaSoft and Surebridge have aligned themselves with well-known network service providers.

Applicast is working exclusively with GTE, which hosts Applicast's application hosting servers in its Tampa, Fla., data center. Applicast also recommends to its customers that GTE provide their dedicated Internet access or data services. Yet, business users can buy their Internet, frame relay or private-line services from another provider. Surebridge has set up a similar relationship with AT&T.

AristaSoft, on the other hand, is collocating its application servers in Exodus Communications data centers, and is teaming with Covad Communications to provide the connection between its customers and application servers.

In nearly all cases, AristaSoft recommends that customers use Covad's digital subscriber line (DSL) services to access their applications. AristaSoft is the only known ASP that has teamed with a DSL service provider to meet its customers' network service needs.

While analysts believe that teaming with one service provider will probably not be a huge selling point with customers, some users may find comfort in knowing that their sensitive financial or human resources information will be traveling over a reliable network.

One thing that all of the ASPs mentioned have in common is that they are setting up dedicated application servers in a private data center. Users can typically access the servers through the Internet, a frame relay link or a dedicated private line. But the servers do not sit on the public Internet.

That's not the case with portal ASPs such as Agillion and Microsoft's bCentral. Agillion, a new ASP in Austin, Texas, is rolling out a CRM application hosting service that users sign up for through Agillion's Web site. The application was designed by Agillion and is only available in beta format. Customers are issued a user ID and password so they can securely access stored information.

Microsoft last week announced that it is making its Microsoft Office 2000 suite of applications available through its bCentral small-business user Web site. Microsoft was short on details but did say its offering is slated for general availability in the first quarter of next year.

One of the benefits of Agillion's and bCentral's business model is that users should be able to access their information from anywhere they can access the Internet. It's likely that portal ASPs will attract small-business users, The Yankee Group's Runyan says.

But portal ASPs will have to offer small-business users something more than an application they can buy off the shelf, he says. Small-business users will be looking for some kind of value-added service that offers them a new or better way to conduct business.

Whether portal-, enterprise- or industry-focused, business users need to understand that not all ASPs are created equal. It's like Granny Smith, Macintosh and Delicious: They're all apples, but each has a distinct flavor.

Next week: Tips from real-world ASP business users.

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