The Need for speed

By LAUREN GIBBONS PAUL
Network World, 02/07/00

You could call David Blumhorst a convert to the application service provider (ASP) model.

Blumhorst, director of IT for Clarent Corp., was highly skeptical when the financial people at his company suggested hiring an ASP to install and host a PeopleSoft enterprise resource planning (ERP) application. "My first reaction: You want me to take our most critical application with our most critical data and put it outside?" Blumhorst says.

While Blumhorst strongly resisted the idea, in his heart he knew his company needed to upgrade its outdated PC-based accounting package. The Redwood City, Calif. IP telephone provider had undergone explosive growth in its four-year history and went public last July with 300 employees.

From inception, the accounting/finance group ran its operations on Intuit's QuickBooks and Microsoft Excel. That wasn't so bad in the days when there was only a handful of employees, but by late 1998, Clarent had surpassed the maximum number of users allowable on its software licenses, and the business/financial people had to share their core applications. The situation was rapidly progressing from an annoyance to a full-blown hindrance. "I knew we were not going to survive on that," Blumhorst says.

A logical next step was to implement a so-called second-tier application, such as a package from Great Plains Software or Solomon Software. But Blumhorst worried that at its current growth rate, Clarent would soon outstrip that level of product. He also wanted to obtain some features, such as electronic workflow and an advanced configurator usually reserved for first-tier packages. Furthermore, he figured he would need a product such as SAP's R/3 or PeopleSoft in a year or two, and he did not want to spend the time and money migrating the data off an interim solution down the road.

But Clarent could not afford the more than $500,000 it would cost to buy and install its own PeopleSoft system. Plus, Clarent would have required extra staff, and finding and retaining individuals with PeopleSoft skills is nearly impossible on the West Coast.

So, when the controller at Excite@Home told Clarent's controller about renting PeopleSoft on a monthly basis from Corio, many of Blumhorst's colleagues thought that was the way to go.

"The rest of the team was drooling. I was dragging my feet," Blumhorst says. His business unit colleagues could not understand his reluctance. The accounting department, for example, was more comfortable with the application rental model because payroll has been outsourced forever. Peer pressure finally prevailed. Because Corio was also located in Redwood City, Blumhorst decided the least he could do was visit the company and check out its reliability and scalability claims.

Although Corio had only one customer at the time - Excite@Home - Blumhorst quickly became convinced that Corio could do a good job handling Clarent's application. "I checked out their facilities and their data center [run by Exodus Communications]. I had to go back and say, You're right."

What finally convinced him was the realization that Corio had hired better PeopleSoft experts than he ever could. Because it had spent so much time waiting for Blumhorst to come around on the ASP topic, the Clarent search team didn't bother looking at any other ASP. Time was of the essence.

The project kicked off in April and the installation went live in August, on time and on budget. Clarent paid a one-time fee for the installation, which included on-site training and moving its existing data to the new system.

Blumhorst declined to specify the amount, but an average implementation costs between $30,000 and $100,000. As for the monthly usage-based fee, which analysts say ranges from $25 to $2,000 per user, per month, Blumhorst would only say Clarent's costs are at the high end of the scale.

Clarent's 30 PeopleSoft users access the application via a virtual private network on a dedicated T-1 line. And according to Blumhorst, no network upgrades were needed to accommodate the new application.

Clarent did not customize its PeopleSoft application, with one exception: The team added the ability to capture serial numbers of components within its telephony gateways in order to provide proper servicing of those units.

But Blumhorst doesn't think the overall lack of customization has hurt his company's use of PeopleSoft. "We didn't have ingrained legacy business processes. We didn't have legacy data. Our business processes were pretty plain-vanilla," he says.

Corio founder Jonathan Lee says companies are fed up with the prospect of customizing enterprise packages such as ERP and customer relations management (CRM). "CIOs of large corporations tell me that they're sick of 20 years of custom, custom, custom," says Lee, who is also chief strategy office for Corio. "These things don't add any value. Siebel, Siebel, Siebel [a leading CRM package]. You've got it, I've got it and my next-door neighbor has it."

These days, Blumhorst is nothing short of an ASP evangelist. "The ASP model is a great way to go. All the things they promised are actually true. I don't have to devote my staff to it. Corio has experts who do this day and night."