ASPs up the ante in the blame game

As application service providers (ASPs) continue to gain momentum, a shift in the responsibility for system and network failures has all manner of vendors mired in a new incarnation of the blame game. And once these issues are finally hashed out, IT organisations should expect a sea change in the way they establish and maintain business relationships with system vendors and service providers.

With more and more mission-critical applications being hosted by ASPs, unscheduled downtime has become a costly misadventure, and customers are holding service providers accountable. As a result, service providers are looking to their suppliers to beef up their service-level agreements (SLAs) with their system and network service providers to limit ASP liability in the case of a failure.

"The requirements of these customers are totally unique to the industry," said Enrico Pesatori, senior vice president and group general manager of enterprise solutions at Houston-based Compaq Computer, which this week announced it will redouble its efforts to address the service provider marketplace. "We have never seen this before."

In turn, IT organisations will soon be demanding similar agreements from their hardware, software, and service provider vendors.

"In the not-too-distant future, we will see the approach of application-level guarantees," said Kate McGuire, telecommunications market segment manager at Sun Microsystems, in Menlo Park, California.

But for many vendors, signing these types of agreements is risky.

"A lot of what happens has not a lot to do with equipment," McGuire said. "Only 20 percent is equipment failure, and 80 percent is people or process."

Financial liability issues notwithstanding, hardware and software vendors are wrestling with application outsourcers over the control of major customer accounts by jockeying for position as the single point of contact.

"What customers now demand is a single throat to choke on the vendor side, and that is leading to a change in the contractual relationships with customers," said Mike Winkler, senior vice president and group general manager of PC products at Compaq, in Houston. "What that means is an ASP may be providing the physical service, but they're doing it as a subcontractor because Compaq is carrying the contract."

Compaq officials said the company is exploring new contractual models for SLAs to accommodate the rapidly increasing demands of the outsourcing companies. According to Pesatori, an announcement is forthcoming.

While hardware vendors are somewhat conflicted about maintaining account control and financial liability, ASPs, not surprisingly, are seeing things a bit differently.

Traver Gruen-Kennedy, chairman of the ASP Industry Consortium, said last week at the ASP Forum in San Francisco that no matter where the actual blame lies for network downtime, "the ASP is ultimately responsible for delivery on quality of service and on the promise of the application set," as far as end-users are concerned.

This puts a lot of pressure on the network service providers.

"`Web tone' will be required to be in business, just as dial tone with voice services is expected," Gruen-Kennedy said. "This is driving network service providers to have to deliver [a higher] quality of service than they ever had to before -- and not just for bandwidth, but for latency and security, too."

The most probable outcome will be some level of shared responsibility between ASPs and system vendors.

"It is an evolving model, and the hardware vendors are recognizing their need to put some skin in the game," said Michael Fox, general manager of information services at InterPath, an ASP based in Research Triangle Park, N.C. "You have to realise that a business customer is going to hold a service provider to a higher level."

But other ASPs maintain that most system vendors will always play a secondary role.

"If you're not a core infrastructure play, it's going to be tough to compete," said Paul Santinelli, vice president of technology at Frontier/GlobalCenter, in Sunnyvale, California. "Companies such as Compaq do not have much beyond machine logic. They build servers, but without the rest, you can't compete."

Laura Kujubu and Michael Vizard contributed to this article.

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