Few Companies Use ASP Services

BOSTON (05/15/2000) - If you're getting set to jump on the application service provider (ASP) bandwagon, you better look before you leap; most of your peers are still waiting on the sidelines.

A survey of 280 Network World readers conducted by Enterprise Management Associates, a market research firm in Boulder, Colorado, indicates that only 17 percent of companies are currently using ASP services, another 24 percent plan to, and 59 percent have no plans to adopt the application outsourcing model.

Of the companies that envision moving to ASP services, 15 percent plan to make a move in the next six months, 25 percent are looking at ASP services six to 12 months from now, and 39 percent are content to wait 12 to 18 months before making any move.

Saving money is a key consideration for companies that are seriously looking into ASPs. Michael Thompson, director of fiscal information systems at the Dana Farber Cancer Institute in Boston, is currently looking at ASP services as one possible strategy for a new payroll system.

"It has to make sense from a cost perspective, as opposed to purchasing an application and supporting it inter-nally," he says.

Thompson says he's also interested in the functionality an ASP could offer. "We want to get away from doing development work on financial systems because we're a health care organization, and it's outside our mission," he says.

He says the "pulse of the organization" would have to be taken before any potentially sensitive applications are outsourced. However, an ASP service is "an option we need to consider," Thompson says.

John Dolan, operations manager for First Claiborne Bank in Tazewell, Tennessee, agrees with the money angle. "One issue is the initial cost," Dolan says. "The kind of return on investment we can get is also important."

Companies still on the sidelines say they're waiting for a compelling need to arise before they adopt the ASP model, but they're monitoring the ongoing evolution of the ASP phenomenon.

Paul Albus, network manager for Identification Services, a manufacturer of personalized ID products in Minneapolis, says he's not actively seeking out ASPs, but he's keeping an eye on the market, just in case. "If down the line, we decided we wanted to add some functionality that an ASP is offering, we'll know what's out there," he says.

Security and other concerns would not stop him from going the ASP route: "If we came across an application we needed and the best option was to work through an ASP, then we'd work through the details," Albus says.

Daniel Gnagy, computer systems manager for the Messenger Post Newspapers in Rochester, New York, is also taking a wait-and-see approach. "We're kind of looking at it, but not really seriously," says Gnagy, adding that issues such as control, security and service-level agreements (SLA) are important, but not primary. "The other stuff would certainly be factored in," he says. "But they're secondary to the need."

Key survey findings from companies using ASP services:

- The top reasons for going with an ASP was that it had better integration of multiple applications, cost savings on deployment of an application, and cost savings on support and maintenance.

- Most companies (62 percent) said ASP services are part of an overall outsourcing strategy.

- Most companies decided to use ASP services to add new functionality, rather than replace legacy or packaged systems.

- Windows NT is by far the most popular platform to support ASP applications.

Unix, Solaris and Linux are bunched closely together, well behind NT.

- Most deployments are starting out small: 31 percent are using two or fewer servers, and 23 percent are using between three and five servers. Only 5 percent are using 20 or more.

- ASPs received high grades from their customers on network reliability, geographic coverage and billing methods. Scores were lower for customized programming services, response time and range of supported operating systems.

- More customers had SLAs than didn't. The average SLA called for 96 percent uptime, 93 percent availability and a mean time of about three hours to repair.

- For nearly all customers, the compensation listed in the SLA was credit against their bills.

- In terms of WAN links, dedicated access at T-1 or below was the most common.

- Most companies (53 percent) are looking at a LAN upgrade to support the ASP service, but only 44 percent are planning on a WAN upgrade.

Key survey findings from companies planning to deploy ASP services:

- The most popular applications are remote access, groupware/e-mail, communication services, database, financial/accounting and document management.

- Most companies (58 percent) are still evaluating the need for ASP services.

- The biggest obstacles to deployment are understanding the market and the vendors, security, cost and lack of vendor references.

- Potential ASP customers identified external control over mission-critical applications as the greatest risk, followed by security.

Key survey findings from companies that decided not to deploy ASP services:

- The top reasons for deciding against ASP services were external control of applications and security, followed by lack of standards for ASP services, lack of definable SLAs and lack of vendor references.

Loshin is a freelance writer in Arlington, Massachusetts. He can be reached at pete@loshin.com.

Enterprise Management Associates is a leading market research and consulting firm focusing on network and systems management. EMA is headquartered in Boulder, Colorado, and can be reached at info@enterprisemanagement.com.

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