Internet World: Users eye ASP concept warily

The application service provider (ASP) concept -- touted at Internet World by computer industry heavyweights and telecommunications companies alike -- could be an attractive business proposition for companies ranging from corporations to three-person businesses, according to users here at the show.

But vendors shouldn't necessarily count on a gold rush. While remaining open-minded about the idea, users say they are going to think long and hard before they let third parties host applications.

"I try to get projects done under budget and on time, and if someone tells me I can get a project done the way it's supposed to be done using a third-party provider to host applications, sure -- I'm willing to listen," said Warren Winter, information technology manager for the Consumer Health Care Group at pharmaceutical giant Pfizer, in New York City. "But it's got to be proven that there is a benefit to me, and I'm not sure big companies like IBM, with the margins they need to make projects worthwhile for them, are going to be able to offer me cost benefits."

The basic idea behind the ASP computing model is that an ASP hosts and manages applications, which users access over the internet. This is different to aspects of traditional outsourcing, where third parties come into a company and take over their entire data centre and IT functions.

Many users say that they would be glad to hand over to a third party the hassle of upgrading and maintaining software. But in addition to questions about cost benefits, there are other issues users bring up. These issues involve security, bandwidth, and the psychological hurdle standing in the way of moving from "owning" applications to "renting" them.

Here at the show, the ASP concept is being embraced by IT companies like IBM, as well as teleco companies such as AT&T, Global Crossing and Bell Atlantic. For example, Global Crossing announced on Wednesday that it is building new data centres in the US and Europe, and will expand its Web hosting, content distribution and applications hosting services to businesses around the world.

Also on Wednesday, IBM and AT&T announced they would offer turnkey e-commerce applications, supplied through service providers, to small and mid-size businesses, with network management provided by AT&T.

In addition, in a keynote address yesterday, Bell Atlantic chief executive officer and chairman, Ivan Seidenberg said that hosting business-to-business internet applications will be part of the company's portfolio of services.

Oracle has also been pushing the idea, with company CEO and chairman Larry Ellison saying at various events here this week that the company will expand its database sales to ASPs, and will itself offer hosting services for its own financial-management applications.

Before they adopt these ASP offerings, however, users say questions about data security must be answered, especially for businesses, like insurance companies, that deal with sensitive personal data.

"I'd think that there would be a lot of resistance because of the data security issue," said Winthrop Robinson, director of technical services for W.R. Berkley, an insurance holding company.

"You would have to be assured that the ASP is providing data security at least as good as your own -- it might reassure companies if they could maybe partition the application itself from the data, and keep the data in-house," Robinson said. "This is probably possible but then you have a lot of communication between the partitioned application and the data, which leads to questions about bandwidth."

Bandwidth is also an issue, despite the strides being made by teleco companies to lay high-speed IP infrastructure, for processor-intensive applications such as imaging and design software, said some users here.

"Even a T1 line to a third-party ASP won't give you the response you need when you're dealing with applications involving three-dimensional imaging," said Steven Luo, an engineer at Pitney Bowes.

Pitney Bowes has taken steps toward implementing the ASP computing model for some applications, Luo said. For example, the company now uses an ASP to host, manage and update an application that automates searches for components and appropriate component suppliers, he said. "Before, we did it ourselves, but it was crazy, we were dealing with updates that took something like 50 or 60 CDs a month, it was too time consuming," he said.

On the cost-benefit side, several users said that the benefits of using an ASP might be more immediately apparent for small and mid-size companies than for large companies.

"We don't have the money to buy a $US150,000 purchasing and receiving application, though I'd love to have one," said Andrew Bosak, treasurer of the Halmark Group, a small construction contractor. "If we could get someone else to provide one for us at a reasonable monthly fee, I'd be interested."

But a final hurdle for many companies, large and small, may be simply a psychological barrier.

"Even for applications where it makes sense to move over to an ASP, there's a hurdle psychologically," said Russell Peter Granger, an internet marketing and business development consultant working for ProEd, a training company in New Jersey. "Even companies that become convinced that an ASP makes sense, theoretically, will have to get used to the idea of 'renting' rather than 'owning' applications."

Granger pointed out that 30 years ago, many companies paid monthly to use "outsourced" applications from third parties that provided time-sharing processing power on mainframe hosts.

"This idea of the ASP is coming full circle to those days in a sense -- the difference being that now, outsourced applications provide users with real-time interactivity. Still, it's an idea whose time has come again, but it will take some time to take hold," Granger said.

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