ASPS: Do they work? - Sample Essay
The article ‘ASPS: Do they work?’ is the result of further collaboration between Soliman, Chen and Frolick (2002) and adds to their extensive collection of published literary on the subject of ASPs and outsourcing (Association for Information Systems, 2004; Dr. Khalid S. Soliman, 2004). The article endeavors to cover the reasons for using ASPs, the critical factors relating to the success of ASPs, the industries in which the ASP model can deliver value, and the issues that should be considered when selecting an ASP. This brief will analyse these themes, validate the presented findings and critique the article as a whole. The structure of this brief will follow the order in which the article introduces the themes.
Reasons for ASPs
The writers quote research from 2000 into the reasons companies are outsourcing to ASPs. While more recent research generally supports the article’s stance, other authors, such as Lavery, contest that the emphasis on the stated motives has changed, and new ones have surfaced. He reports that one of the most important benefits of the ASP model is the higher level of accountability that software vendors must provide customers (Lavery, 2001).
There has also been a shift from cost saving, tactical contracts to strategic outsourcing deals. CIOs and senior managers are seeking outsourcing vendors that offer cost predictability, and can help them innovate and drive strategic change throughout their companies (Information Week 2001; McDougall 2004). In Information Week’s survey of 75 business technology managers on ASPs, less than half the respondents considered cost to be a significant factor in selecting an ASP.
According to the survey, customers labeled whether an ASP can become a true partner in the user’s business as the most significant issue to consider when selecting an ASP (Information Week 2001, p. 1). Blue Cross Shield’s CIO, Carl Ascenzo, highlighted this trend when commenting on the recent outsourcing contract his company struck with EDS. He stated that, “Outsourcing relationship are becoming more about strategic partnering, and as we go forward, we need to align with someone who brings not just computing scale but who understands our business” (McDougall 2004, p. 2).
Soliman, Chen and Frolick (2002) identify six critical success factors for ASPs. This research provides the foundation for the DEMAND framework which the authors recommend ASPs base their business models on. Hope and Khair (2001) of Ovum, offer a model that, despite showing some synergy, is generally contradictory to the DEMAND paradigm. They suggest the key parameters that need to be considered when defining winning ASP business models are: the use of outsourcing and partnering, the nature of the application, the vertical or horizontal nature of the service, the structure of the support offered, and the size of the organisation being targeted (Hope & Khair 2001).
From these defining characteristics seven dominant models are identified. They are: wave two ASP, ASP with channel to SMEs, vertical/specialist ASP, wave one business application ASP, aggregator ASP, integrated solution ASP, and server-based computing specialist ASP (Hope & Khair 2001, p 79). There is a strong theme throughout the report that choosing the best partnering or ownership options is vital to the success of an ASP. Fontana (2001, p50) concurs with this idea that ASPs don’t have to directly own all of the components identified in the supply chain by stating that, ‘increasingly, providers [ASPs] are partnering to exploit each other’s expertise and enhance their own business’.
In agreement with Hope and Khair (2001), Seltsikas and Currie (2002) found that there was no one-size-fits-all ASP business model. Their extensive research suggests that the ASP business model is evolving with time, but that currently the survival of an ASP is based on their ability to change their practice for each customer to provide them with strategic benefits (Seltsikas & Currie 2002).
One industry expert believes that a successful ASP business can be simply modeled around the following four factors: unique/cost reducing service, constant service enhancements, sound financial models, and a clear migration path (Bolding 2001). Industries for ASPs In addition to the listed industries that ASPs can add value to, there is evidence that ASPs can cater to the technology needs of nonprofit organizations, particularly in regards to CRM systems (Nonprofit Business Advisor 2002; Bhagat 2003). However, contradicting the relationship between industry and ASPs adding value, it has been surmised that the benefits that ASPs offer are instead associated to the types of applications they can be employed to handle (Hope & Khair 2001).
In contrast to this research and the article, an IDC study revealed no link between the return on investment (ROI) realised by companies utilising ASPs and their industry type (IDC Asia Pacific Press Releases 2002). The investigation spanned 54 organizations across a range of industries that had outsourced to ASPs, and showed that, on average, those organizations posted a 400% ROI during a five-year period (IDC Asia Pacific Press Releases 2002). Interestingly, the measure of the added value was shown to be dependant on the size of the company (Mears 2002).