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Application Service Providers (ASPs): The Quiet E-Commerce Revolution

If you're a business manager or an advisor to business, you need to be fully aware of a new technological revolution. While this revolution is strangely silent, its implications will be heard for years to come. The revolution concerns a family of software applications that are changing the nature of business, more than any other. In this article, we provide some guidelines on how and when to take advantage of these software applications as well as highlight some of the innovators in the field.

ASPs: Answering the Question, "Is this any of my business?"

Between the recessions of the early 1980's and the early 1990's, management gurus were abuzz with a selection of battle cries, all claiming to help businesses concentrate on what they did best and how to do it even better. Many careers, books and conferences focused on 'solutions' including the likes of business process re-engineering (BPR), total quality management (TQM), the flexible organization, competency building, outsourcing, downsizing and rightsizing.

Technology played a significant role in all of these solutions. Complex and expensive software known as Enterprise Resource Planning (ERP) systems often emerged as the predominant method to ensure that these 'new' management approaches and priorities were implemented.

With the current downturn in economic indicators, it should be no surprise that businesses are yet again seeking to answer core questions, the most critical being, "what business are we in?" But, unlike ERP systems, whose return on investment still remains elusive for most firms, businesses can now turn to a source that yields immediate and quantifiable benefits: Application Service Providers (ASP).

What is an ASP?

ASPs are firms that design and execute software solutions that are hosted on the Internet rather than in-house. Think of ASPs as the final stage of outsourcing - that is, once you've outsourced all the functions that aren't critical to your business, you can still outsource the technology that allows you to do your business.

ASP Example 1: If your expertise and resources are invested in product innovation, chances are the last thing you want to do is be concerned with tracking inventory. One solution may be signing on with an ASP developed by Inquiry Management Systems. Their webAIMS software is a Web based materials distribution system that can receive orders from any authorized person anywhere in the world and have the requested material on its way within 24 hours. Real-time inventory levels are available at time of order entry. (www.ims.ca).

ASP Example 2: As an owner of a small or medium size firm, you may be interested in hosting a conference to bring together clients or colleagues but don't have the time or resources to coordinate all the activities involved in registering attendees. An option is to use an ASP such as that administered by www. e-registernow.com. Their service eliminates the need to generate and track all the forms, including privacy-sensitive client and payment information. This service is billed as " ideal for association memberships, little league sign ups, course and conference registration".

But, why should you consider an ASP over other solutions such as ERP systems or keeping technologies in-house?

The financial argument is easy: according to a recent study by Internet researcher IDC, an ASP implementation will yield significant quantitative and qualitative benefits including an average ROI of over 400% over five years. Furthermore, recent surveys of Fortune 500 companies found that almost 80% of firms that implemented ERP systems were unsure whether they had, or will ever, achieve real return.

Finally, when should you consider an ASP?

Businesses are always walking a tightrope, balancing on one side the need to control and predict critical aspects of business and, on the other side shedding themselves of activities that either slow down or inhibit sustainability or growth. Using an ASP will cause you to closely re-examine exactly how you are conducting your business. And, while the investment is a fraction of more complex ERP systems, nonetheless you need to follow some very specific and proven guidelines around timing and features before choosing an ASP.

1. Timing

Consider using an ASP to address a function or series of activities if you answer "yes" to two or more of the following five questions.

i. Risk Management. By continuing to conduct certain activities yourself, are you exposing yourself, your employees or your clients to an unacceptable level of risk? For example, if you gather client information for marketing or client service, can your systems protect the integrity of that information?

ii. Competency. Do you engage in a series of activities for which you don't have the requisite expertise in-house?

iii. Opportunity. Are you missing out on opportunities to conduct different activities that could build you sustainability or growth - but, you don't have the time or resources to recruit and staff positions to accomplish these activities?

iv. Expense. Have you concluded that your return on technology is not what you need to be competitive or meet financial obligations?

v. Culture readiness. Is your business culture supportive and willing to divest itself of activities that are traditionally conducted in-house?

2. Features

Choose an ASP to replace a function or series of activities only if the Internet-based software application meets the following three criteria:

i. Provides a positive experience for the intended user.

ii. Provides reliable and appropriate levels of client service.

iii. Provides management with access to meaningful and flexible reports.

If you choose an ASP wisely, you can clearly focus more time on the core activities that will make your business succeed.

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