"The challenge is ASPs [application service providers] will never have the infrastructure needed to get into hundreds of millions of users to make this a US$100 billion industry," said Bobby Soni, who leads consulting work on ASP-hosted services at KPMG Consulting. "Therefore, we believe the AIP [application infrastructure provider] entity is the nexus. The tier-one service providers need to step up," he added, referring to companies such as AT&T, Sprint, Exodus Communications and others.
While Cisco and KPMG Consulting won't discuss anything more than a general strategy, sources confirmed that they have assembled a package of services drawn from about a dozen smaller companies, designed to strengthen the service levels of ASPs. That has been one of the snags keeping ASPs from adding more customers.
ASPs have no trouble plugging in new servers on the front-end to add customers, but "they found out [that] other services, like monitoring, trouble tickets, trouble-ticket resolution, a lot of that stuff didn't really scale," Soni said. These service-level problems have resided at the infrastructure level underneath the new servers.
"It's more about telecommunications and Internet infrastructure than things related to the operation of the business itself," said Melanie Posey, an analyst at IDC. That's where Cisco thinks it has something new. "So far nobody's really tried to go in and sell a whole system of stuff," Posey said.
The plan is to sell the package of services to telecommunications companies as a subscription package that they could resell to ASPs. The package is called application delivery management infrastructure, or ADMI.
Cisco and KPMG Consulting believe that the 550 telecommunications companies now doing hosting will consolidate to about 40 strong companies, Soni said. Sources said Cisco already has work under way with Exodus and British Telecommunications, but Cisco would not confirm this.
"We at KPMG will help design and build such automated systems. We are currently doing so," Soni said, refusing to go into further detail. Cisco owns part of KPMG Consulting.
Cisco would provide the hardware and share subscription earnings with its smaller partners, officials familiar with the package said. KPMG Consulting would act as system integrator, earning an installation fee. Other details about the business model are undisclosed. Such regular, predictable income would especially help the smaller partners, two officials said.
The package could include several services, such as "provisioning" ASP services to their customers, monitoring traffic flow, finding and fixing errors, crediting customer accounts when service falls under preset levels, and security.
"It's a lot of stuff," said Amy Mizoras, an analyst at IDC who believes such services are increasingly important. "As service agreements get more competitive, you'll see more performance metrics."
