Corio, Looks to Break From the ASP Pack

SAN MATEO (03/20/2000) - One of the many criticisms of the ASP (applications service provider) model is that it doesn't allow for customization. Although it is true that the one-to-many nature of application outsourcing runs counter to customization, at least two ASPs are working to address customer concerns in that area.

USInternetworking (USI) and Corio, two of the early leaders in the nascent ASP market, are bringing limited customization to the table in what USInternetworking executives are calling a "one-to-several" model.

"As we've gone to market we've realized that organizations don't want a one-to-one solution, nor do they want a one-to-many," said Bryan Linscott, vice president of product development at USI. "Instead they are looking to take advantage of vanilla with some extras. The middle ground is one-to-several -- customizations specific to that type of organization's needs."

For its part, USI is developing modular solutions to address the varying needs of different vertical markets. USI will offer reusable components, such as credit card processing for e-commerce customers, to serve its disparate clients.

Corio takes a different approach, but also recognizes the inherent limitations of the ASP model.

"In order for us to make money, we need to do it in a standardized way," said Jonathan Lee, founder and chief strategy officer at Corio. "That's what makes the question of customization a challenging one for us."

Corio has developed a product called Orion which enables the ASP to offer various interfaces in what Lee called a "standardized, productized, scalable way."

Customization from ASPs will always be limited, given the economies of scale they need to create by renting highly standardized applications to as many customers as possible. For that reason, Lee said that if you are coming to an ASP to differentiate your business or gain competitive advantage, you're looking in the wrong place.

"If any customer in this day and age wants to differentiate themselves by their ERP [enterprise resource planning] application, they are smoking something," Lee said.

"You shouldn't even think about differentiating at this level. We never said, 'Let us differentiate you,' because that's not what we're here for. You need to do that yourself," he said.

Some ASPs are of a different mind on the subject, believing that, in the ASP model, the need for customization goes away. K.B. Chandrasekhar, also known as Chandra, who founded outsourcing giant Exodus Communications and now heads an ASP aggregator called Jamcracker, said traditional customizing of applications will be a thing of the past.

"Customization is something you did when you had to adapt your legacy applications and didn't want to change the application," Chandra said. "We're thinking the future will look a lot different than the past."

Chandra said that because ASPs are able to upgrade applications seamlessly, and without the typical up-front costs, companies won't have to keep adapting their legacy applications as their needs change.

So as companies look to gain a competitive edge using technology more and more in the digital economy, the question remains as to what role ASPs will play in that landscape. Advocates argue that the outsourcing model allows companies to focus on their core competencies and offload the more tedious technical tasks.

"I think it helps us be more competitive, because it takes the applications in which my staff has the least experience and moves them to someone that does have experience," said Tim Williams, director of IS at the Hard Rock Hotel and Casino, in Las Vegas, which outsources its human resources and financials to Infinium, based in Hyannis, Mass.

"That helps us to focus on internal things that do create a competitive advantage," Williams said. "Everybody has to do the back-office stuff, but giving it to someone that can do it well is an advantage in itself."

Corio Inc., in Annapolis, Md., is at www.corio.com. USInternetworking Inc., in Redwood City, Calif., is at www.usinternetworking.com. Jamcracker Inc., in Sunnyvale, Calif., is at www.jamcracker.com.

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