How to pick
But to pick ASP survivors, enterprises need to look beyond financials. Forrester's Ross recommends that customers start by checking out the application offerings and determining their own need for customisation and reliability.
When customers have assessed their customisation needs, they can decide whether to find a provider that can cheaply offer vanilla applications--such as email--or one that can develop custom fields for SAP. The former will look to make its money on volume, while those that customise will look to make margins on services. "If you don't need customisation, then you go for the best price," Ross says. "If you need customisation, you don't want to trade cost for functionality."
When examining an ASP's customisation capability, Adidas' Schoenegger recommends being sure the vendor can perform with tests based on live data. "Be careful to ensure what they promise is what the reality is. I wouldn't trust anyone who can't provide a prototype I don't have to pay for," he says.
Customers then need to consider how important reliability is to the site and what they're willing to pay for, Ross says. "Decide what it means if the application goes down for an hour or five hours. If I'm Amazon[.com], being down for an hour is unacceptable. If I'm The Children's Place, it hurts me, but I can keep the business running," she says.
A strong service-level agreement includes measurement, management, reports and penalties, explains Warren Wilson, practice director at Summit Strategies. The SLA should cover infrastructure to the people who will be accessing the application. Customers need to be able to measure service metrics. As customers negotiate SLAs, they should be sure to ask for the SLA performance histories of the ASPs.
Of course, not everybody has the same theory on SLAs. Don Jennings, vice president of information services at MadeToOrder, believes that a very strict contract may lack needed flexibility. "If your contract says you need it in four days, and then you need it in one, what happens to your contract?" Jennings says. In his contract with Corio, Jennings has built in the option to sit down once per quarter to discuss more than 400 service-related issues.
A customer should also be sure it has the ability to get out of the contract if the ASP isn't performing. DaimlerChrysler Capital Services recently hired QCS to run its Service Access Point financial applications. Instead of focusing on SLAs, the company made sure it has the ability to walk away from the contract if it is unhappy with the service. So far, that isn't happening. DaimlerChrysler recently extended the deal to five years from the original three and bumped its user count from 50 people to 100. Now the auto group, which manages an US$8.5 billion portfolio and has about 500 employees around the world, is evaluating ASPs in hopes of outsourcing human resources applications from PeopleSoft.
Another thing to examine is the industry certifications that ASPs are starting to attain. ManagedOps.com, QCS and USi have been named by Microsoft as Gold Certified Partners for Hosting and Applications in the US. They all met the eligibility, service quality and operational readiness criteria of the Microsoft Gold Certified Partner Program. They had to demonstrate the capacity to deploy and scale Microsoft technology across different product offerings with high levels of service readiness and competency.
In addition, QCS recently announced that it is the first ASP to successfully achieve the SAS 70 Type II certification, developed by the American Institute of Certified Public Accountants. The certification endorses the company's internal control structure. The SAS 70 certification, performed by Andersen, evaluated QCS' complete managed services environment, including its transition and activation procedures, security, helpdesk, problem change management process, monitoring systems, operations, disaster recovery program and other elements.
Once the contract is in place, customers need to stay tight with their ASPs. "Customers need to take ownership of their projects and realise that this is a partnership," QCS' Charters says.
Corio's Kristofferson agrees. "There was an initial impression that ASPs replace staff. If you're a large company with tens or hundreds of IT projects, an ASP will complement that. That understanding took a while," he says.
The reality is that a company can easily end up like the customers of Pandesic, Red Gorilla or even today's strongest player. "You are at the mercy of the company when it comes to the service they provide," BigBlueHat's Young says. He turned to paper-based billing after the Red Gorilla outage.
