Users, Analysts Weigh In on Vertical ASPs

FRAMINGHAM (04/18/2000) - When Talbert Medical Group Inc. in Costa Mesa, California, selected an application service provider (ASP), it was crucial that the vendor understand the complexities of the health care business.

As a result, Talbert, a group of 106 physicians with $80 million in annual revenue, chose Newport Beach, California-based TriZetto Group Inc., an ASP that specializes in health care. TriZetto hosts and maintains Talbert's physician-management system, Internet portal and SAP AG applications. TriZetto supports Talbert's network and about 150 desktops.

Some ASPs are touting their vertical market expertise, targeting industries such as health care or retail. But how can users decide whether to stick with these specialists or select an outsourcer with broader experience? Observers say it depends on the industry and on users' requirements.

Al Herak, vice president of practice management at Talbert, said a vendor that specializes in health care would understand how health care claims are processed and be familiar with the various layers of the health care system, which includes third parties, payers and providers.

"The most frustrating thing would be to talk to a programmer [who doesn't] even understand what you're trying to accomplish," said Herak.

People in the health care industry generally believe that only outsourcers that focus on the industry or have significant health care practices can host and manage clinical applications, said Mark Anderson, an analyst at Stamford, Connecticut-based Meta Group Inc. and a former hospital CIO.

"If you're talking about running a critical-care nursing [system] and you don't know how a laboratory runs - there's probably not a hospital around that will sign on with someone like that," Anderson said.

On the other hand, if a health care provider needs someone to host an enterprise resource planning application or something similar that isn't industry-specific, then it may consider a broader range of ASPs, he said.

But such vertical-market expertise, which is essential in health care, may not be as necessary in other industries, such as retail, according to analysts.

Although San Francisco-based Coremetrics Inc. targets online retailers with its Web site analysis tool - which it can offer under an ASP model - other industries dipping into e-commerce could just as easily take advantage of the tool, according to Kristen Cloninger, an analyst at Cahners In-Stat Group in Newton, Massachusetts.

Because the market for ASPs in the retail industry is still relatively young, retailers should consider both generalists and specialists, said Eric Schmitt, an analyst at Boston-based Forrester Research Inc.

Retailers should select an ASP with a business-intelligence focus, he said, and should check vendors' customer references and determine whether their offerings provide the kind of information they're looking for.

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