* Small businesses find benefits in partnering with application service providers
If you can guarantee the availability and throughput of your corporate Internet connection to some reasonable level for the purposes of your business, you have an interesting opportunity: not running some, or even all, of the software to support your business operations in-house.
This is the whole premise of application service providers (ASP) – they provide the infrastructure for a business process along with management and maintenance of your data, at a fraction of the cost that you would incur running the same process in-house.
And there’s evidence for this – an IDC study, “The Financial Impact of ASPs” conducted in 2001 showed that “On average, ASP implementations generated a 5-year ROI of 404% and almost half the organizations in the study had payback within six months. Furthermore, 56% of the organizations experienced an ROI greater than 100%, of which 12% reported ROI returns of over 1,000%. The average payback for an ASP outsourced solution was 1.33 years on an average total investment of $4.2 million. The average initial investment was $399,000.”
Since that study, we’ve seen a lot of smaller companies – the small to midsize business (SMB) market – with a lot less than $400,000 to spend on a project also migrate to ASP-hosted solutions. They have signed up for accounting, e-mail marketing services, enterprise resource planning, customer relationship management, and supply chain management, all functions that a few years ago they would never have dreamed of running on an outsourced basis.
But that’s not the whole picture – ASP products can offer more than just cost savings, they can also provide “soft” benefits such as easier business planning and – something of crucial importance to SMBs – an improved ability to focus on their core business rather than running IT operations and supporting applications.
Over the next few issues we’ll be looking at a couple of ASP solutions, some of the interesting issues and opportunities ASPs offer, and the lessons that Web applications designers can learn from them. If you have any thoughts or ASP experiences to share, webapps@gibbs.com is the address to use.
