ASPs Are Getting Vertical, Offering "Downmarket" Solutions (2001)

Those seeking to upgrade on a tight tech budget take note: a new breed of outsourcer just might offer lower-cost options to bootstrapping alternatives. Known as Application Service Providers (ASPs), these vendors host applications remotely at data centers for their clients. Like traditional outsourcers, they take on the nitty-gritty of managing technology operations each day, though on different terms and at lower cost, proponents say. This new class of vendors is less than five years old and before now offered the likes of e-mail, procurement, or accounting and human resource services. However, more recently, ASPs have begun to specialize vertically and take on more difficult tasks. We're seeing many new ASPs that are vertical rather than generic, says Amy Mizores, an analyst with International Data Corp. Research, Framingham, Mass. Medical, insurance, and legal industries probably have the most in the way of tailored offerings, but financial services isn't that far behind. A report that IDC published back in 1999 forecast a $2 billion spending spree on ASPs by 2003. Driven by market opportunity, the growth of the internet, the standardization of data delivery, and the ability of Cisco and other network vendors to develop reliable, highspeed links to the Net, ASPs, many believe, are poised to take off. Providers delivering on an ASP basis are entering online banking, bill payment, customer relationship management and decision support, loan processing, and credit scoring. They've also begun to offer services for derivatives markets and other specialties as a way to combat technology development costs that are increasing by 20% per annum on average, notes John Weisel, the New York City-based leader of financial services strategies for Accenture (formerly Andersen Consulting). Accenture itself has spun off a few ASPs in different industries. One called Alnova runs core processing remotely for banks, with markets based in Latin America and Europe so far. Weisel admits that adoption rates for the banking industry here have been slower then initially expected. He admits, too, that use of ASPs may never fly in organizations with a hands-on operating philosophy. Still, he predicts that more vertical market providers will enter the market and that demand will increase over the next year. Definition hard to come by In a market so new to banking, a barrage of lingo and loose definitions is tending to obscure who ASPs are and what, at least in theory, they can deliver. There is a certain buzz around ASPs, although I think a lot of last year's hype has deflated, says Chuck Moreland, president and CEO of Crossrun, San Jose, an ASP run on Microsoft technology that has a West Coast banking client, and also provides infrastructure and support services to other ASPs. While the banking industry may see a blurring of distinctions and inflated claims--with every outsourcer claiming to be an ASP--the term isn't necessarily synonymous with outsourcing. ASPs share some traits with one forerunner, however, and that is, the wave of the 1970s. Shareware schemes involved disparately located users essentially renting a piece of mainframe computing power to run their customized applications. In those days, the links between the bank (typically the hank's dumb terminals) and outsourcer were forged by expensive dedicated private networks and were used mostly by large companies or universities. Fast forward to today's eclectic environment, where options abound. Like traditional outsourcers, ASP providers generally own the hardware and run well-fortified data centers, or partner with internet service providers (ISPs) to operate their center. But ASPs differ from either the old-fangled shareware or the service bureaus that followed them in a few important ways. First, ASPs are focused on delivering web-based, thin-client applications. These are centrally managed and upgraded at the data center, then pushed out to client browsers over the internet. …