At the core of an application service provider model, is a proposition incorporating availability, uptime and security.

A new category, called 'Application Service Providers' has emerged, driven by the growth
of the internet and the promise of open communications. These 'ASP' offer the use of

applications to any client that can be connected using remote, server-based hosting.

Application hosting is proving to be immensely valuable, particularly among mid-sized

enterprises seeking to compete directly with the largest, most well-funded IT

organizations. ASPs are opening the door to a purse-services sales of applications,

integration, platforms and communications.

IT best practices are at the heart

of the ASP model. Business customers consistently seek to purchase service level

guarantees that equate to a best-practices value proposition- incorporating criteria such

as availability, uptime and security. Remote delivery of these qualities is a

challenge-despite the promise of open, universally available data connections via the

internet, private networks and the public switched network, bottlenecks can degrade

real-world performance. The quality of technology for effective network delivery of

applications services is a critical component that enables ASPs to deliver their services

on a best-practices basis.

The ASP

marketplace



ASP outsourcing differs from traditional, mainframe-based time sharing. It utilizes
client-server architecture and relies on secure, cost-effective packet data

communications. Companies pursuing the ASP model have captured attention, including

high-profile names like FutureLink, ServiceNet, Corio, Usinternetworking and

Telecomputing. In addition, many large and well established companies in data processing,

web hosting and integration services are centering new initiatives on the ASP trend.

In the growing field of ASPs, the

key applications-focus and marketing strategies vary widely. Numerous smaller ASPs are

growing aggressively, in both niche and 'horizontal' application markets. Many are well

past 'beta', they have growing revenues from paying customers and are into their third-

and fourth-generation installations of their server operations. Their customers provide

proof-of-concept for a range of business customers, from small office workgroups, to large

enterprises running mission-critical applications.



Transactional applications, such as commerce and call centers, represent a huge existing
opportunity for ASPs, but so do CAD, banking, retail, medical imaging and cataloguing,

sales management, group ware, and oil and gas industry-specific applications-the list of

application types and markets goes on. The ASP hosting trend is revolutionary in that it

extends the service model to include applications configured both vertically and

horizontally.

One underlying benefit is the

aggregation of resources that lets ASPs offer access to applications at a cost lower than

companies can deliver internally. This includes the cost of hardware, as well as the

substantial additional costs to fund corporate IT support.



Because of the relative lack of availability of business applications for small and
medium-sized enterprises (SMEs), these markets present the most promising opportunity for

ASPs.

Though much of the ASP market

publicity has been placed on high-end ERP applications such as PeopleSoft and SAP, many

different types of applications services are thriving, and these include the needs of

SMEs. These market segments represent a continuum of interests that ASPs can serve,

differentiated by application type, service levels and degree of customization.

Application services provide an

effective mechanism for the delivery of reliable, consistent computing on a best-practices

basis. Sales sometimes include end-to-end management (or resale) of data connections and

managed services such as virtual private networks (VPNs), in addition to remote

application server hosting.

The emerging ASP

business model



Application service companies are finding that they must deliver more than just cost
savings to win customers. Customers seek assurances of quality. Many have long sought what

has become standard for IT organizations in the very largest enterprises-internal service

level agreements (SLAs) based on stated criteria for uptime, security and availability.

Given this driving need, it is not surprising that many ASPs have roots with integrators

and operations professionals practiced at delivering just these types of guarantees.

The appeal of best practices is

becoming widely evident for the coordinated hosting of electronic commerce and enterprise

resource management applications-for example, hosting retail and manufacturing trading and

inventory applications that would be costly to integrate at distributed sites. In a host

context, applications like these require high assurances of security and reliability.

Therefore, as more SMEs turn to a service model, best practices are an expectation. Like

large enterprises, ASP customers will not tolerate revenue losses or business disruption

caused by downtime or security breaches.



Two up-front advantages of outsourcing are cost savings and speed of deployment. Many
customers initially tend to reduce cost to direct hardware expense associated with a Total

cost of ownership (TCO) model. For small-to mid-sized enterprises, ASPs can deliver the

same set of applications at lower TCO. An ASP can also offer more rapid deployment of

applications across an enterprise, including planning, implementation, resale of

connectivity and value-added data communications, and ongoing support services.

Core value

proposition: Best practices



However, the most compelling service value proposition ASPs can offer is higher
performance levels. Current ASP business models are based on the same types of

service-level agreements used to internally define enterprise IT performance. By

implementing best practices, ASPs ensure the proper applications service level

administration in a secure and reliable manner. Because they are so significant to

defining value, ASPs have developed 'best practices' selling models, based around the

following service guarantees.

Availability: Some providers are

delivering over 99.9% business application uptime.



Security: This is a key selling point that ASPs must overcome to win customers in the
mid-market. ASPs are adding security to platforms such as Windows NT.



Networked Storage: Including disaster recovery, this is a convenient value-add and a point
of entry to the ASP market.

Management: Enterprises need to

manage their desktops and corporate users effectively. ASPs can provide a single point of

management and administration for many types of corporate customers.

ASPs typically enforce these

guarantees by using securely and closely controlled server environments, often adding

proprietary modifications to ensure security and guarantees of performance uptime. The

central question in blending these elements with applications is how delivery is defined.

This is what puts many applications beyond the availability of some companies, and creates

countless headaches related to version control, security, wide area network (WAN)

management and storage.

Delivery:

The choice of hosting technology



Application delivery requires reliable, remote data access and network management. ASPs
help their clients overcome limitations related to access and management of bandwidth,

often through partnerships with telecommunications providers and systems integration

firms. Just as handling operational control of the server and security for the

applications remains central to the ASPs unique role, the choice of a network delivery

platform is a fundamental choice that determines the level of service quality an ASP can

actually deliver.

ASPs find themselves delivering

applications in enterprise environments where little or no network infrastructure exists.

Whereas large enterprises have already invested in network upgrades to support

client-server computing, new environments may have LAN (local area networks), but WANs are

scarce. Additionally, internet connectivity varies from dialup connections to dedicated

T1. The presence, or absence, of a WAN or a high bandwidth internet connection affects the

way that an ASP can provide access to hosted applications.



Because traditional computing architectures such as client-server often consume large
amounts of bandwidth between PCs and servers, the network is important. Outside LANs,

bandwidth is very costly. Therefore, hosted application environments require an altogether

different architecture for the delivery of applications. There is a strong relationship

between the network and the computing platforms that run on top of the network. In order

to deliver effective application services, ASPs must choose a computing architecture that

is best suited to the available network.

In addition to overcoming the

network delivery issues, ASPs also need to use software platforms that provide the

administration and security necessary to make applications work as well as if they were

delivered and administered locally. An application-hosting platform needs to support

remote management of applications and desktops in order to provide IT best practices and

end-user customer care.

Computer

architectures for the network reality size="2">



Today, there are many divergent approaches to this problem. At the high end of the market,
ASPs are using regular PC clients to provide access to hosted enterprise applications,

such as ERP, over high bandwidth, dedicated corporate connections. In the mid-market-for

customers with fewer than 5000 seats-the network is often the limiting factor, so ASPs are

forced to use computing architectures that require minimal bandwidth. These include:

ASPs must choose from these

architectures to deliver enterprise applications and IT best practices, to manage users

just as if they were serviced from within an enterprise. Although the commercial

development of these three delivery technologies has not fully matured, each of these

three technologies plays a plausible role in solving at least some of the basic delivery

requirements. However, it is clear from conversations with many ASPs that current-not

future-performance is an important issue. The business of application hosting requires a

best-practices performance.

Web-based applications are

appealing, especially to those ASPs who wish to deliver services through a 'portal' site.

Users access web applications through their browser software. While this is a good a way

to deploy applications across many users, in order to truly deliver best practices, an ASP

still needs to manage the browser application. As with any other desktop application, the

browser has quickly become a heterogeneous computing environment. This can exacerbate the

problem that outsourced applications are intended to solve-the cost and best practices

issues associated with managing applications running on personal computers.

Java applications simplify many of

the issues of version control and individual desktop management. In a Java environment,

the user downloads an application and it runs transparently on his computer. Java

applications work well in environments with multiple operating systems and computer

platforms. To date, performance of Java applications has been poor in comparison with that

of thin client-server computing. Additionally, the bandwidth required for Java

applications raises an ASP's network costs and puts pressure on the profitability of

application services in some market segments.

Thin client computing has provided a

natural fit for many application services targeted at the mid-sized enterprise. The thin

client model solves two problems endemic to these types of companies-lack of sufficient

network and end-user management.

ASPs typically choose to control

their operations from a back-end data center, and many ASPs are adding helpdesk services
to make these offerings completely turn-key. This model of tight integration and in-house

administration is proving to match a wide range of market needs. Because the thin client

model user a set of applications running within a data center, as ASP can use thin client

application delivery to administer all applications from one place. Enterprise users are

able to run these applications remotely, with the network transporting only keystrokes and

screen updates.

In a thin client environment, it is

possible to support individual users on dialup connections or offices on dedicated data

services. Additionally, thin client technology enables an ASP to remotely administer and

support individual desktops from the data center.

Among technology providers offering

a thin client model for applications delivery, Citrix has taken the early lead. Despite

promising alternatives, many ASPs rely on Citrix as the best alternative for hosting on a

best-practices basis. The Citrix architecture delivers the advantages of thin client

applications delivery, and thus allows ASPs to enforce the codes of practice and

service-level agreements that define their marketability. This approach to delivery

preserves their cost advantages and helps them provide reliable and scalable services.

In addition, full compatibility with

Microsoft Windows NT servers and Windows Terminal servers has provided important

server-side ubiquity for business applications. One common theme among ASPs is the

enhancement of reliability and security on any platform. ASPs tell us thin client is the

best way to provide this level of service quality for remote users. Citrix overcomes the

crucial problems of scalability, user management and application deployment.

Many working ASPs sell Microsoft

Windows applications. In these environments, Citrix provides an advantage. Most ASPs

anticipate moving to other platforms, at which point platform-agnostic application

services will become increasingly important. In order to keep their lead, Citrix should

continue developing their application services platform to enhance an ASP's ability to

deliver highly available and secure application services.

The ASP USP face="Arial, Helvetica, sans-serif" size="2">



The sheer diversity of Application Service Providers demonstrates the promise of the ASP
business model. Companies in a broad range of industries are using ASPs to access numerous

applications- some of these applications are industry-specific, while others are commonly

used productivity and office suites. The ASP core value proposition extends beyond cost

savings to a broader and sustainable model. This model encompasses the quality of service

guarantees associates with IT best practices that are otherwise beyond the reach of many

enterprises.

In order to conform to IT best

practices, ASPs must overcome connectivity and network performance constraints. The thin

client model addresses performance limitations inherent to communications

architectures-especially those of cost-constrained SMEs for which applications hold the

brightest promise. Numerous ASPs are clear that enforcing best-practices standards for

performance is directly tied to service control and effective delivery, and that Citrix is

the best available way to deliver quality.

Application services with absent

best practices remain inferior to in-house solutions that do conform to IT best practices.

The ASPs most adamant about their choice of Citrix are the ones that are providing new

standards for quality-converting 'best practices' into a service model. These providers

guarantee secure and reliable (99.9%+) uptime, and they are taking the initiative to

develop new service standards. For many ASPs, delivering service guarantees requires

strong integration's between the application services platform and new applications.

Excerpted from

'How ASPs Deliver Value'



Courtesy: Giotto Perspectives