The application service provider (ASP) distribution model — whereby customers rent software that is delivered via the Internet or IP (Internet protocol) networks — provides businesses of all sizes with access to powerful applications
previously beyond their reach.
Perhaps the applications were themselves too expensive, or maybe the skilled staff required to run and support them were beyond the means of a small to medium-sized enterprise (SME). The type of companies that are emerging in the ASP space are varied. They range from software solution developers to bureaus to telcos.
E-commerce solutions provider 3-tier.com decided last year to provide e-commerce solutions via the ASP model. Before specialising in e-commerce, 3-tier provided intranet and CRM (customer relationship management) systems for New Zealand companies. It then parlayed its Internet and database experience to the e-commerce market and now has 17 ASP customers.
Tim Muhundan, 3-tier sales and marketing director, says the company identified the core applications needed to run a small to medium-sized enterprise and packaged them so they could be hosted on a secure Web Server on the Internet. The resulting CREM 2000 (customer relationship and e-commerce manager) has modules covering: e-commerce (product cataloguing, secure ordering, shipping, order fulfilment and order tracking); banking (secure interface to banking gateways, credit card clearance etc); CRM (managing customer service, personalisation, logging incidents and tasks against customers, segmentation of customers based on profile and setting up complex promotions); accounting (GST, basic financial reporting); knowledge management (indexing and searching of documents); analysis (OLAP (online analytical processing) and data warehousing for analysing transactional and behavioural data, Web navigation analysis and auditing);and integration which allows the ASP to talk to the client’s back-end system if applicable, as well as with partner businesses using a non-proprietary XML (extensible markup language) interface.
3-tier is packaging CREM-2000, so that any ISP can offer ASP functionality to their customers and Web developers can set up an ASP solution without understanding database or XML technology.
“There is so much business in the e-commerce space — and we are keen to share our ASP technology with Web design companies and solutions providers in a market that is going to be highly competitive.”
The CREM2000 ASP services can be accessed by millions of external users and managed by up to five concurrent internal users via a secure Internet connection. The hosting platform comprises Windows NT servers running CREM2000, Microsoft SQL Server 7, Internet Information Server 4 and Micro-soft Commerce Server 3/Microsoft Commercial Internet System (MCIS2). Customers access services via an HTTP browser with a secure connection.
Because the interface is pure HTML (no DCOM nor Java), it can be accessed from behind a firewall and it uses so little bandwidth it can even run from a cellular connection. 3-tier’s ASP offerings are not tied to a single ISP but are spread across several ISPs including Voyager and Mail-Exchange. Muhundan says the hosting partner (ISP) with the best strategic fit is determined by whether they offer value-added services wanted by the customer (for example, Inter-net access, email etc) and the required availability and tolerance to down times.
Value for money
He believes the greatest benefit to customers is the cost of ownership as they are mainly small to medium-sized businesses wanting value for money, and without the resources to invest in an in-house e-commerce infrastructure.
“The customers outsource their e-commerce and CRM and it costs less than what it would cost if the customer develops and maintains the system themselves The customer also goes online within weeks rather than months and has an e-commerce site that sells without them worrying about transactions or interconnections to other systems.
“We find the New Zealand market extremely price sensitive. So a company will only look at an ASP if the ASP can provide functionality at a lower cost of ownership than what it will cost the company to generate the same functionality internally,” says Muhundan.
Most 3-tier customers pay a monthly hiring cost of between $200 and $2000 for every-thing including an e-commerce Web site, link to a bank gateway, CRM functionality, basic accounting reports and OLAP.
There is a set-up cost that covers consulting, data loading, setting up data update interfaces, setting up users etc. Typically this ranges from $5000 to$50,000 for an SME. The ASP rental fee is monthly and payable by automatic payment. It covers CREM2000 hire, as well as third-party licence fees (for example, Microsoft SQL Server licence and digital certificate fees). In addition, the customer’s data is backed up regularly and the customer has the CREM2000 management screen allowing them to maintain and manage the site without the intervention of the ASP.
Muhundan says customers usually start with a basic system and add more features incrementally. “For example, it would be pointless paying for OLAP functionality in the first month as there would be no historical transaction data to drill down into. The ASP model lends itself quite nicely — as customers pay for additional modules as and when they need them — thus keeping better control of the cost.”
Muhundan says that even in the past 12 months customers are now demanding more of the fledgling ASP industry.
“An increasing number of people are asking for a more personalised e-commerce Web site, driven by a CRM system and manageable by non-IT-literate marketing and accounting professionals. We are also getting more demands for XML-based B2B [business-to-business] interfaces to their e-commerce sites, which we are just starting to provide.”
While 3-tier uses ISPs to host its ASP service for the majority of its customers (and this will be the path taken by many entrants into the market), companies with a background in the computer bureau/outsourcing area are also looking to become ASPs.
Aoraki, which owns the Cardinal data centre and Jade programming software, is combining aspects of both in its newly formed ASP Jade Direct.
Earlier this year Aoraki set up the new division to deliver simple business applications, written in the Jade programming language, to small businesses. Jade Direct provides the application hosting services delivering Jade applications to multiple end-users from a server farm at Aoraki’s data centre over a secure wide area network. It aims to provide the service to end-users for a flat fee of less than $100 a month and is running two pilots.
The data centre is made up of high--specification Intel-based NT servers and IBM RS/6000s. The data centre is highly secure and has all the normal fire, smoke, flood protection and electricity generation backup required of a mission-critical, 24x7 operation.
Jade Direct’s servers are monitored by custom-built Jade system management software and by an operations centre, manned 24 hours a day. The same people, technology and protocols used to manage Cardinal’s large customer systems are applied to Jade Direct’s applications. Applications hosted by Jade Direct run on either Windows NT or IBM AIX (Unix) operating systems at the server end. At the customer’s end, any device able to operate Windows 95 or above can run a Jade Direct-hosted application.
These applications are connected to the customers’ PCs via the Internet. The predominant method is for the customer to connect to the Jade Direct servers by dial-up through their ISP. Other Internet connection options are direct dial-up access to Jade Direct through a virtual private network, or a LAN-to-LAN dedicated circuit connection for large sites.
On their own PC desktop, the customer accesses their Jade Direct application through a Jade Smart thin client. This is a small application (typically around 2.5 Mb) which communicates with the Jade Direct application on the server. It is similar to a Web browser communicating with a Web server, only far more intelligent.
Jade communications manager Greg William-son says the crucial difference between Jade Direct and Web-based ASPs is that for Jade Direct both the application on the server and the “browser” at the customer’s end are made with Jade. The user is connected to the application in real time as opposed to the “click-and-wait” approach of the Web. It is also allows more intelligent functionality such as full-function printing (including print previews, instant validation and other full PC application functionality), avoiding the limitations of HTML and Java through a Web browser.
“Finally, having Jade at both server and client ends means the data traffic between them is kept to a minimum, operating at a fraction of the network overhead of other thin clients,” says Williamson.
Another bureau, Datacom, is working with three technology partners to offer services across the Web to the 5500 members of the Employer Manufacturer’s Association.
Datacom, the Employer Manufacturer’s Association, Ernst & Young and Tenuteq — formerly Masterpak — have formed a partnership around a CRM offering. Microsoft is also involved as a technology provider. The figures EMA has put up so far are a cost of $20 per user a week.
Some ASPs, such as Sydney-based Solution 6 which intends to launch here early next year, are specialising in high-end software such as ERP and CRM suites. Solution 6 has designed a range of SAP R/3 templates that are being used in Australia with UniCEF.
Kent Duston, Solution 6 ASP general manager, says the company has a number of pre-configured templates, of which trading and distribution systems is the first. He says by using templates the company expects to get the activation time for an application down to 14 to 30 days.
Solution 6’s service runs on IBM AS/400 servers, in a managed data centre and uses Telstra’s Big Pond intra-net. The service runs over a public frame-relay cloud with a firewall to the Internet so users can also access the Web. Duston says the system is designed to support 10,000 concurrent users.
Solution 6 plans to deliver its service through chartered accountants and last year acquired its New Zealand distributor ORC (Office Resource Centre) to gain its chartered accountant client base.
Meanwhile, Clear Communications is renting an automated credit card clearing facility called Payment Gateway. Created by Clear with Auckland development company Direct Payment Solutions (DPS), the system was piloted by bus company Coachnet. Customers rent the application from Clear at a price based on transaction volumes.
Wayne Nicholas, Clear’s strategic business development manager believes finding the right application is essential to success and in addition to payment clearance Clear is considering offering procurement services.
Choosing and ASP - what should I look for?
Because of the new-born nature of the ASP model, customers should be very specific about what they want delivered and at what levels of performance.
Once the market takes off, service quality will be the main differentiator between ASPs. Customers should try to get clear service level commitments.
The ASP should set out:
- The functions to be delivered as part of the service.
- Anything that is optional and subject to an additional fee.
- A commitment on availability of service.
- Quality of service when running.
- Average and maximum response and repair times in the event of a fault.
- Arrangements for reporting of service-level performance.
- Penalties applicable for failure to meet service-level commitments.
- Any elements of service excluded from service-level commitments.
Other items to check for with an ASP offering are certified staff experienced in implementing and supporting the core applications on offer, expertise in operating and managing a network-centric data centre and a close relationship between the ASP and all its major suppliers.