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The Insidious Resistance To ASPs

SINGAPORE -- Why has the adoption of the ASP model been slower than expected? Why aren't organizations embracing a model that allows reduced implementation risk, more predictable costs and higher reliability?

Already, the ASP market size seems to be tracking to the more conservative estimate by IDC of US$7.8 billion by 2004, rather than the more optimistic estimate by Gartner Group of US$25.3 billion by 2004.

Certainly, earlier criticisms that ASP technology was immature or that application selection was limited were valid. However, there is emerging evidence that other factors are in play that are not as obvious and may be quite insidious.

This article contains five key reasons why ASP resistance continues and suggests some techniques for getting past these issues.

1. IT Executive Power Erosion
Don't expect CIOs and IT managers to embrace ASPs with open arms. A contributing factor to the slow adoption of ASPs may be the associated power displacement that occurs when an ASP is implemented.

In an ASP model, a capital budget that may previously have been allocated to IT for hardware, software and services may now become an operating budget that may not necessarily reside in IT. For example, if a company adopts an ASP model for a sales force automation (SFA) project, would it not make sense for the operating budget to be transferred from IT to the sales department?

An accompanying effect to budget changes is the potential for smaller IT departments and computer rooms. As with the IT induced "right sizing" of business operations in the '80s and '90s, ASPs will also displace some personnel and physical hardware within many IT departments. Expect to see some interesting defensive mechanisms as IT executives fight to retain their people and their beloved server farms.

Does this mean that the demand for IT professionals will decrease? Yes and no. ASPs will certainly be a consolidation point for hardware resources and some technical personnel and that may translate into less work in some IT departments.

However, skilled analysts and project managers that can grasp both business and technology issues will continue to be crucial to successful ASP implementations.

2. Software Vendor Bias
Although software vendors are rapidly signing deals with ASPs to host their solutions, don't expect them to necessarily provide an objective opinion on which model - packaged or ASP - is most appropriate for a business.

Often, full software package installations are more lucrative for vendors and offer a higher likelihood of supplementary professional services contracts. Don't forget that the cost savings that ASPs pass on to customers are often eaten by vendors.

Even if a software vendor is its own ASP, they still may steer their customers towards a packaged solution in order to generate higher short-term revenue. Also, many packaged software vendors do not prominently display their ASP partners on their websites. To test this bias, ask a regional packaged software salesperson for details about their ASP offering and judge their enthusiasm and responsiveness.

3. Integrator Bias
Why would an integrator have a bias against ASPs? Well, some system integrators derive significant revenues from installations, upgrades, performance tuning and other services related to packaged software implementations.

These same services either don't apply or are far less time consuming with ASP implementations. Also, many integrators are more likely to have stronger alliances with the software vendors themselves than with the ASPs hosting the applications. Given that many organizations rely heavily on the opinions of their integrator, they may easily be dissuaded from pursuing the ASP model.

4. ASPs Are Just For Small Companies
Some large businesses feel that ASPs are really designed only for smaller organizations. This may have been a valid argument two years ago but no longer applies.

Large companies may also have other motives for deferring the ASP decision. The client/server implementations of the '90s were not exactly a high point for many large organizations. Client/server was over-promoted, difficult to implement and maintain, and did not provide the quantum leaps in productivity expected over mainframe systems.

With many organizations finally stabilizing their client/server implementations, they are not exactly looking for another major restructuring of their infrastructure. Of course this fear of change is most prominent in larger, established companies and is somewhat counter-balanced by new companies that view the ASP model as the fastest and most economical way of establishing a systems infrastructure.

5. Bankruptcy, Security & Privacy Concerns
Many valid concerns that are raised during ASP evaluations relate to bankruptcy, security and privacy risks. Bankruptcy is a very appealing card to play when critiquing the ASP model. However, although the risk of bankruptcy of an ASP is quite real, it should be assessed in the same rational manner as the risk of bankruptcy of traditional critical suppliers:

* Perform due diligence on the current financial stability of the supplier

* Produce a contingency plan including an alternate supplier

* Interview existing customers of the supplier

Security and privacy issues are complex and should not be trivialized, especially if the information of concern is always maintained internally within an organization.

However, if the information is to be shared externally via the Internet with customers, vendors or other entities, then the ASP model may actually be superior to other alternatives.

Is it really likely that the average corporate IT shop can claim to have higher levels of security and higher standards of privacy protection than an ASP? Are corporate resources really available to maintain a comprehensive security infrastructure including firewalls, monitoring and physical security?

The focus of a company's ASP evaluation should be on whether or not the security and privacy measures taken by the ASP are aligned with their corporate commitment to security and privacy.

Of course, generalizations are dangerous and every organization is different. Not all organizations are resisting the ASP model. Some organizations are quickly moving past these biases and realizing early benefits of ASPs.

The best IT executives and integrators are also realizing that ASPs offer the possibility of actually allowing a greater focus on strategic business systems rather than commodity systems like e-mail and general ledger.

So how do you manage the five types of ASP resistance? This is a difficult question since many ASP evaluations are performed by the same players who are most threatened by the change. Outside consulting perspectives may be useful, but it is important to verify that the consulting organization is truly unbiased and doesn't benefit from a packaged software recommendation.

Also, don't be afraid to demand that software vendors provide a comprehensive list of ASP partners and a detailed comparison of features in both their packaged and ASP implementations. If a software vendor does not have an ASP implementation, ask them to justify this strategy and consider other vendors if you aren't satisfied with their response.

The role of education is a powerful one in separating the myths and realities of the ASP model. Much of the resistance will be significantly reduced once all stakeholders in the ASP space have time to digest the model and learn to leverage it rather than fight it.

Finally, although somewhat of a management clichi, it is also vital for businesses to have a president or CEO that "champions" the ASP cause and is thoroughly educated on both the pros and cons of the ASP model. If the champion understands the full value of the ASP model, they will be less likely to balk at the first sign of internal resistance.

* Mark Clancy is Partner & Co-Founder of igeno consulting inc., a boutique consulting company specializing in management and IT consulting. Clancy has previously worked for Andersen Consulting and BC TEL. He can be reached at Mark@igeno.com.