Applications for Rent

If your IT department is like most sites, you probably have a couple gray beards toiling away. You know, old people in their 40s, like myself, or even their 50s. Veritable fossils.

Ask them about the good old days of time sharing, back when computers were either too expensive or too cumbersome to own, and most corporations leased computer time on machines owned by third-party providers.

These old timers will also remember a phenomenon that followed close on the heels of time sharing: application outsourcing. Data processing companies labored anonymously in the background of hundreds of corporations, processing payroll and doing other mostly human resources-related chores.

Time sharing went away as computers got cheaper and easier to use. Then some of the HR applications migrated back in-house as software was developed to leverage inexpensive distributed hardware systems.

Now outsourcing is back with some modern day twists, along with a host of new buzz words and acronyms. The talk at major trade shows and at watering holes all over Silicon Valley is of ASPs -- application service providers. But instead of renting out the hardware base, like their time-sharing ancestors did, ASPs rent out the software. Funny how things change. It used to be that the software came almost free with the big, expensive IBM mainframe. Now it’s a similar situation, only in reverse.

Another group of companies are selling services that sound suspiciously similar to what the old data processing companies used to provide. They call themselves BSPs, or business service providers. BSPs are hawking specific services for rent that are targeted toward vertical markets, such as finance or retail.

But what is really new about these companies and are their services worth exploring? Why do they exist at all?

One big reason is the Internet. In the old time sharing days, only programmers accessed a remote system through a dedicated terminal operating over a leased phone line. The personal computing and client/server booms made universal user access the norm. Time sharing became obsolete due to its costs.

Today, users have affordable access to remote systems through the Internet. The big computers and the networks that buttress enterprise systems have grown more, not less, complex. Software upgrades fly out the vendors’ doors often before the previous versions are running smoothly. Meanwhile users want service level guarantees that in-house departments tear their hair out trying to meet.

The promise of the ASPs is simple: They’ll take care of all the leasing, maintenance and installation of software and rent it back to the users. And they will service you to your specifications, even doing highly targeted application development work.

Instead of licensing expensive applications, then buying and maintaining computers to host them, storage systems to contain the data and networking equipment to control the data flow, let outsiders sweat all the details. To be cost-efficient, ASPs make better deals with big software providers than individual users could ever attain. That’s the same business model used by the old time-sharing vendors, who’s massive mainframe buying power shaved several points off the purchase price of big iron, compared with what individual buyers paid.

In other cases, the companies acting as ASPs are offshoots of the application vendors. Oracle Corp.’s new Business OnLine service gives customers the ability to rent Oracle applications hosted on Oracle’s hardware.

There are, however, plenty of skeptics out there ready to douse the growing ASP fires. Some critics say close association with any ASP can trap a user into the ASPs installed base of software and programming knowledge, effectively locking the user out of emerging solutions.

Other detractors say that in a day when information is the coin of the corporate realm, most enterprise customers cannot afford to have their business-critical data outside the immediate control of the business.

While there is some validity to these and other voices of skepticism, I believe IT managers ought to be closely examining developments in both the ASP and BSP communities. Think of them as other paths to efficiency provided to you by Internet technology. Besides, it’s not like there are scads of qualified and able IT staff waiting to be hired by you or anyone else. --Bill Laberis is president of Bill Laberis Associates Inc. (Holliston, Mass.) and former editor-in-chief of Computerworld. Contact him at

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