Bait and switch
In the race to build their customer bases, ASPs often oversell what they can do, promising easy access to the most desired applications for cents on the dollar.
Foodservice.com, a content site and e-marketplace for the food service industry, found itself trapped when its ASP repriced its services after a software upgrade.
Karin Wertheim, Foodservice.com's cofounder and vice president of e-business services, says the plan was to run Oracle software with ColdFusion, which would allow the company to turn its flat files into a relational database. But her service provider, Breakaway Solutions, "had tremendous problems running ColdFusion with Oracle," Wertheim says. "Our site was continually down. Breakaway believed it could run ColdFusion on a Sun platform when it works better on an NT box."
Problem was, Wertheim says, when Breakaway switched Foodservice.com's apps to a Windows NT server, the ASP also repriced the contract.
Wertheim says she felt snookered. Breakaway, she says, pulled her in with affordable prices, then jacked up costs after it debugged the system. "They assured us when they signed the contract they knew how to take care of the problems," Wertheim explains. "Instead, we were down a couple of times a week, sometimes for a few hours. When we did switch to NT, it was fine."
Ultimately, Wertheim dumped Breakaway in favor of managing and hosting her company's databases in-house. Sharing services was unacceptable, she saysâ€"and she didn't like losing control of her company's data and having to ask someone else to run reports for her. In the end, she says, Foodservice.com found it could run three servers for the same price Breakaway charged to share servers.
While ASPs bill their services as an inexpensive way to get to market quickly, they could be a more expensive option long term. Once you're hooked with fast setup and low cost of entry, it's often too costly to shake a relationship.
Cost analysis is key, says Lawrence Chiango, corporate vice president of technology at Cornerstone Brands, a USinternetworking client. "There were certain costs I wasn't expecting," he says. "If you're the type of business that constantly wants to be upgrading and establishing promotional relationships to drive traffic to your site, you need constant changes. If you just want to do basic cosmetic changes on your site, the cost behind the certification process the ASP charges you to test it and recertify the code can be equal to or greater than the initial development effort."
These changes don't come cheap. "People need to look at their contracts very closely and at their projected development time," Chiango says. "They got you up very quickly for low cost. But does the [additional] cost every time you need to make a change in your site fit into the development plan?"
Chiango's advice: Involve your technical people in all ASP implementation decisions. After all, they know how systems willâ€"or shouldâ€"integrate, and how much additional technical work will need to be done over the life of the project. "You have these marketing and finance majors making tech decisions that six months or a year down the line are very costly because they didn't have that knowledge," he says.
