The Pros and Cons of an ASP Model

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The ASP model has been heralded as superior to the in-house client/server model because it eliminates hardware and software costs, reduces development time and is easier to maintain. But is it right for you?

An ASP, or application service provider, offers a packaged application on a rental basis, usually over the Web. Instead of creating the infrastructure for hosting and running a software application yourself, you contract to have the service hosted, maintained and run by an ASP.

The ASP uses centralized computer services to "rent" applications to you and to provide back-office services to feed data to these applications. The ASP hosts the applications at its data center and allows you to run these applications remotely. While the application results can be downloaded to the your site, the applications themselves run only on the ASP's servers. The servers are set up in a multi-tenant environment, taking advantage of storage and utilization across multiple clients for maximum scalability and flexibility.

Advantages. The right decision depends on your objectives, resources and business environment.

· Faster to implement and to realize a positive ROI. An ASP solution virtually eliminates the lag times associated with procurement, allocation of IT resources, networking, etc.

· Better allocation of internal resources and higher quality service. The learning curve is shorter with an ASP. A qualified ASP provides a competent staff experienced across dozens of hosted databases and multiple industries. Especially in an integrated environment, a hosted ASP solution can be an excellent alternative to hiring and training internal resources.

· Lower operational costs and cost of ownership. Equipment is owned, maintained and upgraded by the ASP - for much less than it would cost you to purchase and maintain. Software licenses are often much lower through the ASP since they negotiate multiple licenses across many clients.

· Greater leverage and flexibility. Managing a solution internally can become a quagmire. Typically, internal solutions are supported by IT, which can make it difficult to get what you want within the cost and timeframe you need. Since an ASP partner is dedicated to delivering the functionality that you require, an ASP solution is easier to manage and can provide better service than your in-house shop.

If you need to decrease expenses, you can dial down the support of your ASP. You also have more leverage with an ASP if service levels decline because you can force remedial actions or cancel the contract with cause. Try that with your internal IT group.

Disadvantages. Nothing's perfect, and the ASP solution is no exception, so be sure to choose a reputable partner with the right safeguards in place to protect your most valuable asset - your data.

· Data security and access. You may be concerned about adopting the ASP model for mission critical applications or where personal customer information is maintained. For example, can your competitors hack into the ASP's computer and see your data? Make sure you fully understand the security procedures in place with your ASP partner.

· Vendor stability. Investing in third-party software yourself means accepting the risk that the software company will remain solvent. Licensing the software through an ASP greatly reduces your risk since the ASP manages the software vendors. Make sure your ASP will find comparable substitute tools and applications if the vendor goes out of business.

Securing a solid ASP agreement. If you decide that an ASP is right for you, negotiate a strong agreement that clearly defines the scope and delivery of services. This way, you ensure that you will enjoy the greater cost savings, flexibility and leverage associated with an ASP.

An ASP agreement should include development and maintenance of the applications that support the business processes, plus the external arrangements required for implementation, namely: application, hardware, feed updates, data cleaning and transformations, telecommunication fees, configuration costs and connectivity.

When negotiated as part of the hosting fees, the ASP handles all logistics and external costs associated with delivery of services. Ongoing consulting and analysis may be bundled into the service delivery or be ad hoc components.

Evaluate the length of the contract. The longer the commitment, the better contract you can negotiate, either by lower monthly costs, more services or both. But a shorter-term contract could serve you well if you think your business may change or if you are concerned that you might outgrow the environment provided by the ASP.

The higher level of service you demand, the higher your costs will be. So, first determine how critical your application is to your business and then negotiate service levels to match. Standards of ASP service level agreements should include:

· 95%-99% application availability 24/7.

· User support.

· Incidence response time.

· Penalties for failure to meet the prescribed terms.

· Termination for cause.

· Monthly averages for performance.

A good ASP already has a standard service level agreement that defines who is responsible for what, when, at what cost and in what circumstance. Ask to review a copy when evaluating your ASP partner.

The advantages to implementing a database marketing solution via an ASP outweigh the benefits of building these capabilities internally. With an ASP, you realize quicker implementation, increased flexibility, better service, lower costs, and greater leverage to address business requirements. But only you can decide if it's right for you.


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