A Bit of History
In the 1960's, big businesses relied on computers to handle
tasks in a completely different manner than the way we think about them
today. Due to the size constraint of a computer (no smaller than
Pickup Truck and often as big as a single family dwelling), its high
maintenance, and the large expense of developing software to actually
do something meaningful, businesses often outsourced there workload to
computer companies that were better equipped to address hardware and
software needs. Many companies like IBM flourished from large
multi-million dollar contracts to handle many of the worlds largest
company's computer needs.
By the late 70's, the concept of charging businesses for computer
services by the workstation and by the hour was formulated to handle a
larger spectrum of businesses. This "time-sharing service" was
marketed mostly to smaller companies who needed the benefits of
business productivity software, but were not in a position to pay for
the large expense of hardware, software, and IT infrastructure. This time-sharing service model worked by
offering businesses the ability to utilize software remotely running on
a powerful mainframe system with a team of dedicated computer
professionals staffed 24/7. This new software marketing technique
had high promises of revolutionizing the way software was delivered to
By the 80's, the desktop computer was born and technology was
quickly advancing. Computers were quickly shrinking in size,
increasing in performance, and becoming affordable. The
"time-sharing" concept quickly fizzled away due to these rapid changes.
Today, the proliferation of the web, has again remolded the way that
businesses are thinking about software and software services. Many
new business models have sprung up. One of
these interesting models is called the ASP, or Application
However, a cloud of mystery surrounds the new ASP business concept.
This latest buzz word is trying to appeal to businesses --
especially small businesses and startups -- because of its promises to
drastically lower the costs of software and services. Much of the
ASP concept actually sounds like a re-invented "time sharing service"
from a few decades ago.
Could this be another dotcom scandal that is trying to prey on the
ignorance of small business?
Well, let us first get a good understanding of how the ASP model actually
works before casting judgment on the latest business hoopla.
Defining an ASP
The terms "ASP" and "Application Service
Provider" are applied specifically to companies that provide services
via the Internet. In most cases, the term ASP has come to denote
companies that supply software applications and/or software-related
services over the Internet.
Here are the most common features of an ASP:
- The ASP owns and operates a software application.
- The ASP owns, operates and maintains the servers that run the
application. The ASP also employs the people needed to maintain the
- The ASP makes the application available to customers everywhere
via the Internet, either in a browser or through some sort of "thin
- The ASP bills for the application either on a per-use basis or on
a monthly/annual fee basis.
ASPs come in all shapes and sizes.
For purposes of this article, we will identify the two most common ASP
models and refer to them as "Simple" versus "Traditional".
Whether you are considering a simple ASP or traditional ASP, it is
critical that you understand there is always RISK INVOLVED when
selecting an ASP. The trick to getting the most out of an ASP, is
understanding those risks and determining whether that risk is small
compared to the ASP advantages offered.
If you were to start a small business today, you would probably begin
by contacting three or four extremely common and largely unnoticed
- A Web hosting company - Companies like
Earthlink provide a classic
ASP scenario -- virtual Web hosting. These companies provide
hardware, software, bandwidth and people to host Web sites for
companies and individuals. Typically, they charge something like $10
to $30 per month for the service, and may host hundreds of accounts
on a single machine. Today, most people acknowledge this type
of ASP as an Internet Service Provider (ISP).
- An e-mail provider - Although many Web hosting
companies usually provide some sort of e-mail service with a Web
hosting account, you do not have to use them exclusively.
There are many other simple ASP solutions for your email needs like:
- Free services such as Hotmail or Yahoo! Mail
- E-mail server ASPs who run exchange servers, POP servers or
IMAP4 servers and distribute them on a monthly-fee basis.
These ASPs usually offer more sophisticated capabilities with
respect to things like: email forwarding, virus checking, spam
filters, alias mailboxes, larger file attachment capabilities, and
- A fax provider - Companies like
J2, and MaxEmail provide a
fax service that can deliver faxes directly to your e-mail box.
This ASP practically eliminates the need for fax machines and
dedicated phone lines.
- An eCommerce provider - One of the quickest growing ASPs
are those who provide specialized web storefronts for businesses who
want to quickly setup a catalog of their products/services to sell
- A Payroll provider - With constant tax law changes,
desktop payroll software and the frequent expense of tax table
updates are a thing of the past. Online providers like
PayCycle deliver a simple
internet based method of providing payroll to any number of employees
working in a company. Other advantages include automatic
quarterly government filings, direct deposit, and pay-as-you-go
The huge advantage of using these ASPs is
the fact that you don't have to do anything to get started. In the Mid
90's, a small business looking for these services would have needed to:
- Purchase Internet connectivity and a router
- Purchase one or more servers
- Purchase Web server software, e-mail software, etc.
- Hire a person to install and administer the software
- In the case of a fax machine, purchase the fax machine and a
dedicated incoming line.
- Purchase payroll software and hire a bookkeeper to handle all the
corporate paperwork involved with payroll.
Those are tremendous hurdles. Now, most of
these services can be ordered and delivered on the same day, and the
monthly cost for all of them combined is probably less than $75 per
The other thing to note is that ASP
versions of these services will be significantly better than anything a
small business owner can afford to provide. For example:
- In the case of Web hosting, the provider will normally have a
huge amount of available bandwidth, and the bandwidth will be
redundant at several levels.
- If there is a problem, trained staff on site 24 hours a day will
fix it immediately.
- If you need more capacity, it is available with a phone call and
a small adjustment of the monthly fee.
- The ASP will backup the data on a regular basis and is
responsible for disaster recovery.
No small business could afford that level of service with a
home-grown server infrastructure.
The "traditional" ASP is in the business of renting a specialized
web-based software solution to businesses. Software
vendors who use this business model will also use terms like "web-based
software services", "Internet Enabled Software Providers" and "Online
software solutions". These and other derivative tag names all
refer to the same ASP concept. Some examples
of a Traditional ASP might be:
- CRMDesk is a web-based help
desk software that allows customer support automation through the
- AceProject is a
web-based project tracking system that helps to manage all kinds of
projects within an organization.
- Mercantec PowerService
allows you to create a powerful website that puts a service business
online and gives your customers real time access to schedule
appointments or other services.
Today, the current trend of many software
vendors with expensive software is to become a traditional ASP and
offer their specialized software online at an attractive low monthly
fee. In fact, the traditional ASP market was invented by the
large software giants that wanted to get their expensive software in
the hands of small business.
The ASP model has evolved because it
offers some significant advantages over traditional approaches. Here
are some of the most important advantages:
- Especially for small businesses and startups, the biggest
advantage is low cost of entry and, in most cases, an extremely short
- The pay-as-you-go model is often significantly less expensive for
all but the most frequent users of the service.
- The ASP model, as with any outsourcing arrangement, eliminates
head count. IT headcount tends to be very expensive and very
specialized, so this is frequently advantageous.
- The ASP model also eliminates specialized IT infrastructure for
the application as well as supporting applications. For example, if
the application you want to use requires an Oracle or MS-SQL
database, you would have to support both the application and the
One thing that led to the growth of ASPs is the high cost of
specialized software. As the costs grow, it becomes nearly impossible
for a small business to afford to purchase the software, so the ASP
makes using the software possible.
Another important factor leading to the
development of ASPs has been the growing complexity of software and
software upgrades. Distributing huge, complex applications to the end
user has become extremely expensive from a customer service standpoint,
and upgrades make the problem worse. In a large company where there may
be thousands of desktops, distributing software (even something as
simple as a new release of Microsoft Word) can cost millions of
dollars. The ASP model eliminates most of these headaches.
After reading many of the above advantages offered by an ASP, you
might be quick to judge that an ASP solution is always a good thing if
available. But be very careful, depending on the ASP model you
are talking about, some ASP software services are just not worth the
advantages it brings.
The Big Risks of using an ASP
When you really think about it, an ASP is nothing more than an
outsourcing company. In a manner of speaking, your company is
alleviating certain burdens by placing them in the hands of a complete
stranger. Did we strike a nerve with that last statement?
Truth be told... businesses are closing their doors at alarming
rates today. Based on information gathered by the U.S. Census Bureau's
Characteristics of Business Owners Database, less than half of
businesses that employ people are still operating five years after they
open. More over, cumulatively 64.2% of the businesses are
failing (discontinuance of ownership) in a 10-year period. This
unfortunate statistic doesn't just affect small businesses
either... recent bankruptcy problems with MCI WorldComm and Enron
Energy Corp. in the United States depicts that even the largest of
corporations can have financial troubles at a moments notice.
The ugly fact about ASPs is that you are really not in total control
of your business. You give up the control for the sake of
convenience and money-savings. This can spell DISASTER for many
businesses that have not thought of a contingency plan if and when
their ASP becomes insolvent.
As a business, you must be prepared for the possibility that your
chosen ASP closes its operation without notice (which is often the case
with the online web-based companies).
The following are important questions you must ask yourself before
taking the ASP plunge:
1. How quickly could you find another similar solution?
2. How many days could your business survive without a replacement
3. How valuable is the information that was exclusively stored at the
4. How much sales revenue would be lost as a result of any downtime?
5. What is the likeliness that a lawsuit will recover my lost revenue,
database, and/or business?
involved with Simple ASPs
Let us look at the business risk involved when dealing with Simple
ASPs. We will use the same common Simple ASP's used in our prior
examples. In the chart below, the business risk factor ranges
from Very Low, Low, Medium, High, to Very High.
Risk Encountered if ASP Goes Out of Business
Minimum Time to Recovery
Business Risk Factor
Web Hosting Company
During the early rise of the internet, it was not too uncommon for
web hosting providers to open as quickly as they would close.
Fortunately, it is not too much trouble to move from one web hosting
company to another. As long as you keep a copy of your web
pages locally, you can easily upload them to another web hosting
1/2 Day to signup with new web hosting company.
Another 1 to 2 days for DNS resolution to point to your new web site
Losing your email provider can be nothing more than an inconvenience
for most businesses.
1/2 Day to signup with new provider.
The worst result of losing a web-based fax provider is the loss of
your fax phone number. If you have the fax number printed on
your business cards and other business material, it could be an
additional unexpected expense to reprint everything also. For
the most part, most businesses don't care much for the
business fax number itself, as much as the ability to receive and
1/2 Day to signup with new provider.
Losing your web-based payroll provider is more of an inconvenience
than a major problem. Businesses can always manually cut
employee checks for one or two payroll period while a new provider
is sought after.
After all, this is the way most small businesses still do payroll
1 or 2 weeks may be needed in order to transfer employee information
to new provider.
Similar to a web hosting provider, the loss of an e-commerce
provider is usually not a big problem if e-commerce is just a small
channel of your business sales. As long as you have your
product images, pricing, and sales material saved locally, you
should be able to upload all information to another provider that
uses a similar shopping cart system.
1/2 Day to signup with new provider.
Another 1 to 3 days to re-add all products to your shopping cart
From the chart above, it is evident that Simple ASPs are not
that risky. The risks are quite small compared to the
incredible advantages. If you tried to handle these aspects of the
business yourself, you would probably encounter longer downtime if a
key employee were to leave you in the midst of your daily operations.
The low risk involved for using any Simple ASP can be summarized by the
- Little chance of losing critical data if company were to go out
- Easy recovery of service to another ASP without much hassle
- small role played in your critical day to day business operations
The simple ASPs are the driving
force behind the hype of ASP advantages... and rightfully so. The traditional ASP
model has gained much of its recognition and acceptance because of the
success of the simple ASP model. But as you will discover, their
is a big difference in the risks taken when one considers a traditional
involved with Traditional ASPs
Now, Let us look at the business risk involved when dealing with
traditional ASPs. Traditional ASPs make up the largest portion of the
ASP market and vary dramatically in the specialized software that they
Traditional ASPs are, for the most part, software vendors who
have changed/adapted their strategy to a web-based solution offering
versus a licensing fee / software upgrade price scheme. These
ASPs typically rent their software based on a workstation basis.
When considering a traditional ASP, there is an unfortunate "leap of
faith" involved that is much greater than that of the simple ASP
model. As you will see in the chart presented below, the
traditional ASP requires more of your business fundamentals to be
managed and maintained by them exclusively. This puts your
business at extremely elevated risks if something were to go wrong with
The chart presented shows some common online business productivity
solutions being offered today and the risk assessment they present to
an ASP client.
Risk Encountered if ASP Goes Out of Business
Minimum Time to Recovery
Business Risk Factor
Accounting / Business Software
Imagine all of your customer information, vendor information,
billing, A/R history, A/P history, etc. being
inaccessible when you open for business the next day.
Regardless if you have a backup of your database or not, the amount
of time required to switch to a totally different
accounting/business software is daunting. You will definitely lose
some data that cannot be transferred to a new system and you will
have significant downtime.
1 week to find a comparable software solution.
Another 2 to 4 weeks to have some of your critical data converted to
a new software solution.
Possible loss of your business if database is unobtainable or
Similar to accounting style software, POS systems are the lifeblood
of a retail store operation.
These systems often contain your entire inventory of products, help
manage your inventory counts, track sales commissions, control your
reordering of low stock items, produce your customer sales receipts,
and balance your daily registers.
This is not the kind of application you want to handle manually if
your ASP suddenly disappears.
1 week to find a comparable software solution.
Another 2 to 4 weeks to have some of your critical data converted to
a new software solution.
Possible loss of your business if sales come to a halt for too long
a period of time.
If your business is all about scheduling appointments with clients,
then losing access to your online scheduling system could be a big
blow to customer satisfaction and your reputation. Not showing
up to scheduled appointments, meetings, service calls, etc. could
cost you sales in the short and long term.
1 week to find a comparable software solution.
Another week to rebuild your scheduled jobs.
Help Desk / Knowledge Base Systems
Help Desk systems are designed to help alleviate customer service
and technical support by building a database of common
questions/answers. The loss of this valuable database will
most certainly set back your customer service, increase field calls,
and possibly require the hiring of more staff temporarily while you
reconstruct a new knowledge base system.
1 week to find a comparable software solution.
It could be months before you can rebuild a new knowledge base that
will provide meaningful data to customers and support personnel.
A company's contact management system is the life blood of future
sales. Your sales staff rely heavily on the information
contained within these types of applications.
Losing your contact management system, is like losing your future
1 week to find a comparable software solution.
Another 2 to 4 weeks to have some of your critical prospect data
converted to a new software solution.
After looking at a small spectrum of
applications, it becomes evident that many traditional ASPs who offer
mission critical applications, are more than just an online software
supplier. The traditional ASP becomes an integral part of the
success or failure of your business. Choosing the wrong ASP can
easily cost your business more than twice the savings you would
otherwise have achieved. In many cases, it could even cost you
your entire business.
If you think it can't happen to you, read this May 2001 article titled
of Pilot seen as blow to outsourcing by Ellen Messmer of Network
World. The ASP company "Pilot Network Services" had big name
clients like The Washington Post, The Los Angeles Times, PeopleSoft,
The Gap, GE Capital, Newsweek and more. That impressive client
list didn't stop this
multi-million dollar backed company from filing bankruptcy and
ultimately pulling the plug on
its entire operation. It left many companies scrambling to find
other comparable solutions at a moments notice. Other extremely
large meltdowns in the general ASP industry, such as Pandesic LLC and
Red Gorilla have had many company's rethinking their ASP strategy.
The high risk involved for using any Traditional ASP can be summarized by the
- High chance of losing critical data if company were to go out
- Difficult recovery of service to another ASP
- Plays too large of a role in your day to day business operations
- Likely periodic downtime from ASP/internet issues can affect
- Considerable downtime if forced to suddenly switch service to
Therefore, meticulous consideration is
needed before gambling your business away on the selection of a
To make matters worse, there are several other critical issues that
commonly occur to Traditional ASPs that could further jeopardize your
company's revenue and future reputation.
Potential Risks and Pitfalls involved with ASPs
The last thing an ASP will ever disclose to you is that their
exists a very real potential for considerable downtime at periodic
times and that there lies other big risks besides an ASP going
bankrupt. In other words, the possibility of not being able to
conduct business at critical moments in your
business is very real. So is the possibility that your sensitive
database is not taken care of in the same secure manner that you would
In actuality, many things can go
wrong between your office web connection and that of the ASP. In some
cases, the problem can be on your end of the connection. In other
cases, the problem can be that of the internet itself. But
in most scenarios, the problems will arise from inefficiencies that
spawn from your ASP.
The following chart depicts some of the more common pitfalls
uncovered by clients who use traditional ASPs for their mission
What You Need to Know
An ASP is responsible for purchasing enough data bandwidth to
provide you reasonable to excellent remote connectivity performance
on a monthly basis. In many cases, an ASP may cut
corners by not purchasing enough bandwidth to give their customers
the performance they truly need. This can cost your business
major headaches on busy holidays, large sales days, and other times
when customer sales traffic is quite high.
To get an idea whether your ASP is providing decent bandwidth, make
sure to ask how many existing online users are typically accessing
their servers during your regular business hours. Then ask how
much bandwidth is present at their location.
A single T1 is the
smallest digital circuit that is often used by ASPs. As a
guideline, estimate that one T1 circuit can probably handle 24 to 48
simultaneous sessions. Larger ASPs will tend to have multiple
T1's or larger digital circuits like T3, DS3 and OC3.
Note: Unless the ASP can provide proof of the bandwidth they are
supplying customers (e.g. monthly bill from phone company), don't
just take their word for it. Request referrals from large
users who have been online during holiday times, or request a
picture of their phone room facilities. Multiple T1's, T3's,
etc. will be quite a spectacle of hardware.
The city, state or country where your ASP resides can be a big
factor in the performance of your connection. The further an
ASP server is from your business, the more likely you will suffer a
lag in computer responsiveness. This could be critical during
holidays, special events, and major sales campaigns.
and more reputable ASPs will have two or more server locations that
can satisfy customers in different parts of the state or country.
Be wary of ASPs that tell you that residing on the opposite side of
the country makes no significant impact on your connection speed.
The internet is made up of a large web of many computer servers.
The path it takes to get from one server to another is not always
the same. Based on how busy the internet is, traffic is often
routed the long way. The closer you are to the server you are
communicating with, the less likely this problem will occur.
Have you ever been surfing on the internet during peak holiday
times? If so, you've probably noticed the slight slowdown when
visiting web sites. The issue is getting worse each year as millions
of new web surfers jump on the internet bandwagon.
If your business is a retail store... can you afford your customers
waiting an extra 5-10 seconds per transaction?
Data Security Issues
You want to find out about internal
security policies with ASP employees, passwords and access to your
sensitive data. Especially be cautious when selecting ASPs
that host their software to some of your closest competitors.
Apologies do little to resolve trade secret matters where ASP
ex-employees, ex-partners, etc. are now holding your database up for
sale to the highest bidder on Ebay.
Unfortunately, many things can go wrong with your sensitive data
that would not otherwise occur if it were in your total control.
Imagine just some of the possibilities...
A. Your data backup set could get mixed up one day and accidentally
mailed to a competitor. You would never know until its too
B. An ASP employee could offer some sensitive financial information
to one of its clients who are considering opening locations in your
C. Your ASP might not spend the appropriate time and money to secure
its location from future burglary attempts. Your
database could fall victim to poor security efforts on the ASP's
I know some of these possibilities may seem remote... but these
incidents can occur if your ASP does not have good
security/management policies in place.
The bottom line... an ASP cannot
guarantee 100% security of your data. So, it pays to
investigate the ASP, its business structure, its clients, and its
current security practices. A visit to the ASP facilities may
be a smart thing to do, if you really want to know how well your
database is secure from the outside world.
Data Backup Strategies
When it comes to data backup, don't take chances on the ASP's claim
that backups are done in a safe and professional manner. Just
like anyone else, an ASP is not impervious to a server crash/failure
caused by a virus infection, HD failure, fire, flood, tornado,
hurricane, earthquake, etc. Total loss of your data is a
one-way ticket to bankruptcy.
Demand the following minimum
prerequisites for your business:
1. An ASP must be able to provide proof that backups are taken
off-site periodically (maybe once a week) to protect you from events
like the ones mentioned above. In most areas, services exist
that will pick-up tape backups and rotate older tape backups daily,
weekly, monthly, etc. Other ASP services exist that can send
your database safely to another web server located in a totally
different city or state.
2. An ASP should be able to offer you a copy of your database
periodically (maybe once a week). Furthermore, insist that the
database is presented in a non-proprietary format (e.g. ASCII, SQL,
ACCESS, DBASE) with all database password locks supplied. Too
often, an ASP will send database copies that do you no good if the
ASP were to go out of business suddenly. The backup set must
be provided in a manner that would allow easy access to the data by
a new software firm or consultant.
Note: Stay away from ASPs that use administrators to rely on
daily backup tapes. This is a sure sign of a weak provider.
With automated backup software, disaster recovery systems, and
auto-changer tape backup systems readily available, there is no
reason to put your database backups at risk to human error.
Make sure your ASP provides an encrypted connection to protect
sensitive data that is transmitted while you are online
between your office and the ASP server. A software/hardware
firewall implementation should also be present to protect against
external attacks that could be used to gain access to your database.
Again, you must remember that your ASP is providing you their
software services over the internet. Competitors, disgruntled
ex-employees, and about a million other hackers would love to
gain access to a poorly implemented web server.
Make sure your ASP is providing the best possible solution for
keeping the web servers online in the event of a power failure.
Many smaller ASP's will try to get away with a standard UPS as a
means of power backup. These devices usually only provide
about a half hour of extra power before the servers ultimately
ASP's who are truly concerned about your business uptime should have
investments in more expensive and sophisticated power management
systems that can provide several hours or more of continued power to
all servers, routers, switches, etc.
Note: You should also place some consideration to the location where
an ASP calls home. Check with the city or state utility
company for average downtime statistics. This can give you an
idea of how often power goes out in a particular city. Some
cities are prone to more electrical problems than others (i.e. old
power grid systems, frequent lightning storms, frequent snow storms,
etc.). Let us not forget about the largest U.S. electrical
outage which happened in August 2003. Many west coast
states using east coast ASPs were dramatically affected by this long
term outage. This is something that doesn't bode well with
consumers who can't understand why a distant power failure would
affect their ability to transact with you.
If a machine fails or an Internet pipe
goes down, what levels of redundancy are in place to keep your ASP
Again, some ASP's will cut corners and not provide the necessary
backup hardware to ensure continuous uptime.
If you (or employees) have questions
and/or problems with the software, what happens?
Are all customer service calls via email only?
In some cases, smaller ASPs will attempt to offer support via web
services only. This could pose a big problem for your business
on critical days when you experience downtime and need immediate
Probably the most important issue that you
need to be aware of is the financial strength of your ASP.
Knowing how economically strong your ASP is, can answer many of the
issues mentioned in this chart.
More importantly, if a serious issue were to arise that caused your
company significant losses (such as being down during large sales
campaigns, holidays, etc.), you need to know that your ASP is worth
filing a law suit for.
The following are some key issues to consider:
1. Is the ASP in the same city or state as your business?
The further they are, the costlier potential litigation can become.
Don't even consider an ASP that is not in the same country as your
business. International contracts will become worthless
if you try to reclaim lost revenue as a fault of the ASP.
2. Is the ASP a profitable corporation worth filing a law suit?
If something critical were to go wrong, and your ASP has no real
assets to litigate for, then an iron-clad contract is worthless.
Unfortunately, many private ASPs will not disclose their annual
financial statements. Buyer Beware!
After reading all of these potential landmines, one might think it
is not worth the trouble to place your business in the hands of a
traditional ASP. Well, that's not entirely true in all
point is that one cannot blindly assume that the ASP model is an
automatic advantage over the conventional way of purchasing software.
The low cost of entry and short setup time can be a real tease for many
startup businesses. But as we have demonstrated above, there is a
lot more to it than just connecting to the internet and renting
For this and other reasons, almost all ASPs have lengthy contracts to protect
themselves from client law suits in the event that you are locked out
of your online application. ASPs are no dummies... they
know that there is no way they can guarantee 100% uptime. In fact, they
can't guarantee much of anything. Most ASPs will just make the contract sound
like a simple formality... but don't be fooled by this. The contract made between you and your ASP is critical
if you are to have any chance of a successful experience with a
Another not-so-commonly discussed issue when referring to ASPs
and their applications, is the software program design itself.
Many ASPs want to WOW you with mumbo-jumbo computer jargon (e.g. CGI,
Cold-Fusion, Java, ASP.Net, etc.) that does little for making your
online session feel exactly like the comfortable, quick and
user-friendly design of a natively written desktop application.
This is because a good portion of ASP applications rely on HTML as
their driving mechanism. HTML is the same language that is
delivering this web page to you right now.
However, HTML was never designed to handle complex forms,
context-sensitive help, native OS controls and more.
Therefore, ASP developers often have to create more complicated
programs with screen designs that often take several steps to fill out
versus simpler one-screen layouts found in most desktop applications.
HTML based applications are also clunky when it comes to on-demand
lookup tables, edit-in-place capabilities, smart data entry controls
that can automatically pre-fill fields while you are adding records,
etc. It may not seem like much, but when one customer has to wait
an extra 10 to 15 seconds for an employee to fill out an invoice, place
an order, schedule a job, etc., it can really start to add up. It
takes time to constantly wait for your online session to go back a
page, refresh the current page, or move forward to the next page on
each "Submit" button pressed.
Of course, an ASP provider using HTML for their software design will
gloat about how their "pure" web-based application can run on any
operating system (i.e. Linux, Windows, Mac OS). But what small
business really cares about that aspect? Only the largest
businesses tend to have legacy issues where certain branches use one
operating system versus another. Most all other businesses will
invest in one technology to maintain and run all their business
All in all, when evaluating an ASP software solution, you must look
closely at the software design as well. Considerable delays in
employee productivity are all too common in many pure web-based
applications where Submit... <wait a second> Submit... <wait a second>
Back... <wait a second> Submit... <wait a second> are a way of life.
Being Your Own ASP
For many businesses, the main attractiveness of the ASP model is its
ability to connect employees from anywhere in the world to one
centralized system. This allows a business with multiple
locations to easily spread out across multiple cities or states and
still be in total control of the entire company database. Instead
of installing computer servers at each location, administering multiple
computer networks, hiring IT staff or consultants to maintain the
infrastructure, purchasing expensive Server licenses at each location,
etc., you can place all of your eggs in one basket. Namely, you
can have one designated location that will serve as the nerve center
for your entire computer network. Due to the proliferation of the
internet, remote connectivity is now a reality for even the smallest
businesses (and you don't need to rely on some other company to provide
Given all the risks of using a traditional ASP for remote connectivity, many businesses are
finding that it is easier to setup their own server and become their own
ASP. You won't get the low cost of entry and short setup time
that traditional ASPs provide, but you also don't have to deal with the
uncertainty of another company.
Another added bonus of setting up your own remote connectivity system is that you can
run any software remotely and not
just one specialized application provided by a traditional ASP.
Instead of awkward and often unfriendly HTML based web applications,
you can actually achieve web-based nirvana with applications that look
exactly as they do on a MS Windows desktop computer.
Imagine having all of your favorite business productivity applications
(MS Word, Excel, Photoshop, etc.) installed on one server, accessible by all
locations in your organization. This takes ASP to a whole new
level. The best part is that it isn't that difficult to accomplish.
In fact, almost 50% of ASPs handle their web-based solutions in the
same manner we are going to discuss.
Back in 1998, Microsoft realized that a not-so-known company called
Citrix Systems, Inc. was making a lot of headway with a product
that allowed multiple user sessions to connect to a single server and
run the software of their choice locally or remotely with the same ease
as a connected PC on the network. It didn't take long before
Microsoft struck a deal with Citrix Systems to purchase the rights to
use their core technology in Microsoft Windows NT. Many software
vendors also realized the advantages of such a powerful concept and
quickly set up shop as ASPs delivering web-based software solutions
using this technology.
As of the date of this article, Microsoft has continued to improve on this core
technology and has fully integrated this Multi-OS session design in
both Windows 2000 Server Edition and Windows 2003 Server Edition.
It is referred to as MS Terminal Services and can be used in a VPN
environment or used directly over the internet. In essence, a
user can connect to a Windows Server using the internet from anywhere
in the world and run any software that is currently installed on that
By the way, What happened to Citrix? Today, Citrix Systems, Inc. (Nasdaq:CTXS)
is the global leader in access infrastructure solutions and the most
trusted name in enterprise access. The Citrix MetaFrame Access Suite
enables people to securely, easily and instantly access the on-demand
enterprise from anywhere, anytime, on any device over any connection.
The solutions provided by Citrix actually complement and enhance the
capabilities that are integrated with Microsoft's latest OS (Note:
Citrix is mostly used for larger enterprises with more sophisticated
remote connection requirements. We
will not discuss Citrix advantages at this time).
Need To Know To Get Started as a Private ASP
For purposes of keeping this section simple, we will be
making the assumption that your business needs require a 25-user license
for remote connectivity. Larger scenarios
introduce more complex setup that is best left for a software
consulting firm to decide.
The following are typical hardware/software requirements for preparing
Requirements (as of 01/01/2003)
Typical Fees (U.S.)
Computer Server with Pentium IV processor; 2 Gig RAM; RAID array of
multiple hard drives; CD Rewriteable Drive
MS Windows 2000/2003 Server Edition with 5 CAL TS License
Additional 20 CAL license of Terminal Services
1500amp Uninterrupted Power Supply
2 High-speed DSL internet connections
Consulting Fees for implementation (10 hours@150/hr)
Total Estimated Fees Involved:
As you can see, this is not a $50,000 investment... not even close.
Also, take into consideration that smaller outfits only needing half as
many online workstations will pay about half as much as the estimate
shown in the chart above. You have to start asking yourself:
Is your business worth less than the $10k investment it costs to set up
your own ASP system versus outsourcing it to a foreign ASP company?
Yes, it is true that you may need to occasionally call a software
consultant to tweak the system, install new software, and/or apply new
security patches. But, a consultant's periodic $150/hr fee will
always be significantly less than paying $100 per workstation per month
The only other expense will be the workstations needed to connect to
your Server. A basic $500 computer workstation with Internet Explorer
installed and an internet connection (preferably hi-speed connection
like Cable Modem or DSL) is all that will be needed. The same
requirements as would be necessary to connect to almost any web-based
The following are more references for the do-it-yourself person or
your software consultant:
Microsoft Terminal Services Checklist
ASP - The ManageMore Way
It's hard to believe that after all this talk about the risks of ASP
models, that Intellisoft, Inc. (developers of ManageMore™) have had an
ASP-like design since before ASP became a buzzword. That's
right... ManageMore was designed in a unique manner to allow for the
software benefits of an ASP model, without all the risk.
Think about it... what is the biggest selling advantage to the ASP
model? It's price... of course. Software vendors who sell
expensive software have been using the ASP model as a new sales channel
to offer smaller businesses their products at a reasonable monthly
rate. However, Intellisoft originally designed ManageMore
Business Software with this same concept in mind. Intellisoft
invested its time in a unique strategy that offered a low cost
software rental option that gives the same price advantages as an ASP
model. The difference lies in the mechanism in which it is
presented. ManageMore installs on your own computer system versus
the ASP model which relies on its software running at its location only
with an internet connection.
Other ManageMore advantages compared to the traditional ASP model
1. No dedicated internet connection is required for small businesses
to access their software.
2. No remote performance issues to deal with because ManageMore runs
directly on your own computer hardware.
3. Your sensitive database information remains secure at your office at
4. One can easily switch from a rental concept to a full purchase
whenever you are ready.
5. Security concerns are less of a problem because the public internet
can be eliminated completely by setting up your own VPN.
6. Data backups are controlled and maintained by your office only.
7. Lower cost per user, compared to similar rates charged by competing
ASPs (around $70/mo for 5 users of ManageMore versus an average
of $350/mo for 5 users on an ASP software).
8. Software upgrades can be controlled by the user easily.
Instead of new features and software design changes being forced upon
the user (like the ASP model does), the user can simply decide when its
best to upgrade, click on a button, read the latest features available,
and download the latest upgrade in about an hour's time.
About the only disadvantage is that you are still responsible for
building out your own network. However, if you properly weigh out
the risks already mentioned when using a traditional ASP, you may find
that it is not worth the initial savings. In fact, many
industry experts agree that the ASP model is all about software and
very little about IT cost reductions.
Additionally, if you like the ASP advantages of remote connectivity for
all of your offices... you can have that too. Products like
Microsoft Terminal Services (discussed in the prior section) gives you the
same power and flexibility as the ASP way of connecting workstations except you are in total control of the system and not the other way
Intellisoft's unique software rental concept takes away much of the
major concerns that come with using the traditional ASP models.
As a result of Intellisoft's unique ASP paradigm (i.e.,
separation of hardware from software), the total cost of ownership is
also dramatically less compared to every comparable web-based software
There are definite advantages to certain ASP offerings in today's
fast paced world.
As already mentioned, the simple ASP model is clearly a win-win strategy for most small
businesses because of the low risk assessment. But many of the bandwagon
traditional ASPs will have a very hard time convincing businesses that
there are no hazards and all advantages to placing an entire
enterprise's sensitive business data on someone else's equipment in a
In the end, the main things that a business should really concern
themselves with are:
A. Does the software meet my business requirements?
B. Is the software mature (i.e. stable and free from defect)?
C. Is the software affordable (within my budget)?
D. Is the software developer dependable and reputable (i.e. good
management, financially secure, more than 5 years in business, etc.)?
The rest of the stuff regarding whether applications can be hosted
via the web or not is pure semantics. As we have already
demonstrated in this article, any application can be set up to run
remotely over the internet or through a VPN. In most cases,
hardware costs are insignificant in comparison to the risk of
completely outsourcing key aspects of your business. In fact, The Gartner Group
already estimated that 60% of ASPs will go out of business over the
next year alone. A number that should concern anyone considering
In an excellent article written by Maria Atanasov of ZDNet, titled
ASP Trap: The Complete Guide, much of the problems with ASPs are
uncovered and more good advice is presented on how to avoid problems
that have already bitten thousands of companies that took the plunge
So why all the fuss about ASPs replacing the way software has been
sold for the last 40 years? Well, it may be that those who are
blowing the horns the loudest are the ones who gain the most from the
traditional ASP market emerging victoriously.
As Maria Atanaosov of ZDNet states "Could it be that the strategic
benefits of using an ASP seem too irresistible to companies large and
small. Why pay software companies every year for the privilege of
installing and supporting their applications on an arsenal of PCs when
you can hire out, accessing the same programs across the Net?."
Or could we be looking at another dotcom promise of instant success
that has stock investors investing billions of dollars in ASP
Let us now leave you with a handful of
eye-lifting ASP articles from around the world and let you decide where
the ASP will take your business.
ASP - QuickSilver rather than Gold?
Boy, that was
ASPs: Which Will Survive?
ASP market diluted by
Companies 'leap the faith'
in ASP adoption
The Shrinking ASP
Where Now for
the ASP Market?
ASPs Not to Be?
ASP Stands For Awful Stock Pick