ASP believers offer words of wisdom

Dealing with an application service provider (ASP) is a dicey business when you're used to having total control over your enterprise applications.

But it doesn't have to be that way. Business users who have taken the plunge say you can ease into the world of ASP services without giving up the quality or performance that's critical to your business operations.

The first step is embracing the ASP model.

"You have to have a great deal of faith when handing over critical parts of your operations to a third party. You have to believe they are going to do it better, faster and stronger than you could do it in-house," says Gant Redmon, director of operations at Authentica, a Waltham, Mass., document security company. "The hardest thing about it is getting comfortable with the ASP model," he says.

It's easy to say that National Airlines in Las Vegas fully embraces the ASP business model simply because the airline outsources 50% of its applications. Tim Stanley, vice president of IS at National Airlines, says ASPs offer users real benefits, but users need to pay close attention to the details before signing on the dotted line.

Before you select an ASP you should visit the data center where your application servers will be hosted, Stanley says.

"You have to see where your family jewels will be held," he says.

Only a handful of ASPs are actually building their own data centers. The majority are collocating servers in other providers' data centers. This is why it's critical that customers see the size of the space where their servers will be housed, who has access to that space, how many other customers will be served from that data center and who will be watching over their servers, Stanley says.

If the server hosting area is satisfactory, the next consideration to ask about is bandwidth.

"Look at what level of connectivity from multiple sources your ASP has at its data center, but don't be satisfied by just seeing connectivity from three different providers. Be sure that your servers can be routed to these alternative bandwidth sources if there is a failure," Stanley says.

In addition, just because the lines are there, that doesn't mean your traffic will travel over them. "Some of these lessons we learned the hard way," Stanley says.

Knowing that an ASP's data center is sound is as important as choosing a corporate accounting application. But knowing that an ASP has the required software experts in-house is also critical. Many users, such as Fleetwood Retail, a Houston manufacturer of prefabricated homes, have decided to outsource the management of their SAP applications because the company didn't see how it could hire and retain three or four SAP experts.

It's important to meet with the software engineers at your potential ASP partner so you can feel comfortable with their ability to handle your application, says Don Palmour, vice president of technology at Fleetwood Retail.

By teaming with ASP Qwest Cyber.Solutions, Fleetwood Retail is receiving the attention that typically only large corporate customers get when they outsource, Palmour says. Qwest Cyber.Solutions has more SAP experts on hand than Fleetwood Retail could afford, he adds.

Users should also ask their ASPs how many application implementations they have under their belts, along with customer references.

"Be sure you know how much experience the ASP has in providing the solution you're looking at buying. A one-time implementation doesn't mean they'll be successful the second time," says Terry Hucks, chief information officer at Heilig-Meyers, a manufacturer of home furnishings in Richmond, Va.

Heilig-Meyers is working with ASP Ciber Enterprise Outsourcing to bring its enterprise resource planning (ERP) software suite online. Knowing how often an ASP has set up an ERP application, such as Lawson, is required information, Hucks says, but business users shouldn't solely rely on their ASPs.

There's no replacement for having the right person in-house to lead the project, Hucks says.

Many business users who have teamed with ASPs have also designated someone from their organizations as the lead liaison between their ASPs and the company. Still, other users go outside of their companies for those needs.

Rhythms NetConnections, a USinternetworking customer, drafted a consultant to get its customer relationship management ASP services up to speed.

"Hire your own expert to keep them honest," says Peter McGill, director of sales and marketing systems at Rhythms NetConnections. McGill hired a Siebel Systems consultant who worked with Rhythms and USi through contract negotiations and full production.

"One of the reasons I'm outsourcing is because I'm not a Siebel expert, so we brought in an expert who asked all the right questions," he says.

If you hire a consultant or get a project leader within your organization who is also savvy at the bargaining table, you may be able to save your company a few dollars, as well.

"One of the big reasons you go with an ASP model is to get breaks on licensing fees," National Airline's Stanley says. "When negotiating your contract, find out when the volume discounts kick in."

Typically, the more users you sign up for a service, the lower your monthly user rate will be. When an ASP provides you with the price for the number of users you have now, find out how many more users you need to add to get a discount.

Once you have that figure you can use it in your negotiations by stating that you expect to be at that level or higher within a certain time frame if your company is expecting significant growth, Stanley says. Most ASPs are pushing for five-year contracts, offering lower rates for longer periods, making it possible to reduce your monthly rate even more.

For Sunburst Hospitality, which has been working with USinternetworking since April, application and server performance was one of the company's biggest concerns once they decided to go the ASP route, says Mark Elbaum, director of IS at the national hotel chain.

"When you bring up an application in 90 days, there are certain things you don't get out of the box, and one of those is performance," Elbaum says. Running an application such as PeopleSoft at an off-site data center, with 100 business units accessing it over a T-1, isn't the same as running it internally, Elbaum says. USinternetworking worked with Sunburst until its PeopleSoft Application was humming along. o

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