The ASP Alternative: Technology Choices for Application Outsourcing

The phenomenal growth of the Internet in the latter part of the 1990s will lead to a fundamental shift in the information technology industry in this decade. No questions linger as to whether application hosting will catch on, but questions abound as to how the service will be delivered.

The phenomenal growth of the Internet in the latter part of the 1990s will lead to a fundamental shift in the information technology industry in this decade – the delivery of software as a service instead of a packaged product.

No questions linger as to whether application hosting will catch on, but questions abound as to how the service will be delivered. Every Application Service Provider (ASP) scrambling to establish a foothold in the market uses a different business model.

Even Microsoft founder Bill Gates heralds the need for new products targeted at ASPs. In outlining his new role as Microsoft’s chief software architect earlier this year, Gates said he would spend 100 percent of his time researching new technologies to deliver software as a service over the Internet.

While the ASP market landscape remains fluid for now, one thing is clear. To deliver their potential, ASPs need new tools – both in the form of hardware and software.

Defining the Market

In studying the market, the impetus for change is apparent. Most small- to mid-sized businesses are now connected to the Internet, and application hosting makes good business sense for them because it saves money and improves productivity. That’s because smaller companies can afford to "lease" customized business software that they cannot afford to purchase.

While companies may save money by leasing instead of purchasing software, they will still be charged licensing fees. Indeed, the most significant savings will come from IT budgets because companies will no longer need a legion of troubleshooters whose sole job is to scramble from office to office trying to repair hard drives, install new software and keep everybody’s PC free of viruses.

The obvious question is "How can companies get by without a large IT staff?" The answer: outsourcing. One of the chief selling points for ASPs is the ability to free companies from the onus of network management.

Advantages of Server-Based Computing

This is where the new hardware starts to come into play. In order to provide guaranteed service levels – most ASP customers demand 99.5 percent uptime or better – and hold down their own network management costs, ASPs need the most advanced, centrally managed desktop hardware available.

For a number of reasons, server-based computing is becoming the de facto industry-standard architecture for application hosting. This model bases all hard drives and platforms securely at the server for greater management and cost containment. Application hosting in a PC-based client/server environment does not address hardware concerns at the desktop level. With server-based computing and ASP services, huge investments and continual costs for upgrades and upkeep are minimized.

This arrangement satisfies the ASP industry in no small part because the communication protocols in the thin-client industry are mature. Protocols like Citrix’s ICA and Microsoft’s RDP have been proven in thousands of applications, so reliability is not an issue.

From another angle, however, today’s thin-client computers have a ways to go. While server-based networks are ideal, traditional thin clients are not. Thin clients were just smart enough to run Windows CE or some other fixed-function GUI-based operating environment. Processing power and memory are practically non-existent. In fact, one frustrated IT manager once referred to a thin client as a "toaster" and the term stuck. While thin clients have adopted Windows-based graphical user interfaces, the moniker still applies. Thin clients are a little smarter than the old green-screen terminals of mainframe computing, but by and large they are still barebone conduits. Performance is sorely lacking.

These "toasters" have their place in the right architecture. But, while Windows-based terminals are fine as point-of-sale terminals or warehouse inventory devices, they don’t provide ASPs with the desktop functionality that is needed to compete against PCs.

Overcoming Obstacles

Here’s the problem: ASPs, who can save customers thousands of dollars each year by trimming IT costs and providing workers access to better software applications, shouldn’t trust customer satisfaction to the proficiency of the Internet alone. ASP, after all, is a dynamic model finding the perfect balance between the Internet and a network of hardware and software. Hardware and software should be a major consideration as well.

Because of the specter of "big change," an ASP must convince customers that, once the contract is signed, the service will be stable and promises will be kept. Most people are reluctant to make wholesale changes, and companies are no different. Outsourcing IT functions is still a new idea that is liable to cause anxiety among management, IT staff and workers. The ASP is going to have to convince the customer that vital data will be protected. The customer might even want to retain control over some mission-critical IT tasks.

With the doubt and uncertainty surrounding these decisions, the ASP must be able to offer customers a network alternative that has just as much functionality as a PC client/server network. Toasters don’t fit the bill. Most thin clients simply cannot offer workers the kind of functionality they are getting today from their desktop PC, and that alone could be enough to sour the deal.

The Thin Workstation

What ASPs need is a thin client that operates like a PC – a workstation with all the power and versatility of a desktop PC, but which can still be centrally managed from a remote data center.

The ideal thin workstation for ASPs would have the following:

• Embedded operating system and embedded local applications

• Socket-7/Super Socket-7 Pentium-class CPU

• Up to 128 MB of RAM

• AGP video and 3D sound

• 100 MHz front side bus

• PCI/ISA slot for peripherals

• Optional floppy disk and CD-ROM

• Remote maintenance with wake-on-LAN and remote management support

The main operational advantage of this smarter thin workstation over most thin clients is its ability to locally process applications, thanks to a unique embedding of technology at the desktop. These applications are actually embedded into flash memory, freeing up CPU cycles at the server for mission-critical tasks and improving overall efficiency. This exceptional integration of workstation and server strikes a more perfect balance between PC performance and thin-client efficiency and manageability.

This hybrid access device has broad implications for ASPs. For example, an ASP contracts with a legal firm that has 100 employees. The attorneys want word processing, e-mail and an Internet browser with multimedia support at each workstation. On top of that, individual workstations can be customized with other applications, based on determined work tasks for each employee. Attorneys who need spreadsheet capability can have it. Researchers linked to state and federal archives can access those databases. The Webmaster gets special applications, while billing and clerical get their own local printers.

Embedding the Internet browser and media player at each workstation frees a great deal of CPU resources at the server in order to power other mission-critical applications and improve overall network performance. The embedded media player and browser plug-ins provide access to audio- and video-intensive research and case-building tools. Attorneys and paralegals can access Internet or CD-ROM-based reference materials with full sound and video support, and potent processing capabilities.

Choosing an Embedded OS

A key to embedding localized applications is the use of an embedded 32-bit operating system like Microsoft Windows NT Embedded. While other operating systems like Linux can be used, there are distinct advantages to embedding the prolific Microsoft desktop operating system.

First, the use of NT Embedded gives the thin workstation the ability to support any peripheral device or application that is compatible with the Windows NT 4.0 Workstation operating system. Since the vast majority of device drivers and applications are compatible with Windows NT, the use of NT Embedded gives ASPs the ability to offer customers support for just about any local desktop functionality they might request, whether it is an embedded application, an embedded driver for a local printer, or an embedded driver for an internal modem or xDSL card.

Also, incorporating the widely used Windows NT operating system on a scalable flash disk makes it easier for ASP system administrators to configure and integrate workstations, because all embedded software and devices are native to Microsoft’s prolific Windows NT 4.0 Server – Terminal Server Edition operating system.

In August 1999, Microsoft announced the availability of various toolkits for use in developing NT Embedded platforms for a variety of Internet-enabled devices. While most thin-client makers have been slow to develop NT Embedded, there are thin workstations on the market that support the product.

Answering Enterprise Concerns

The use of thin workstations in a server-based computing environment allows ASPs to give customers everything they want from an application host, and the technology answers all the major concerns enterprise customers have about making the switch to outsourcing.

According to Zona Research’s 1999 Industry Update Report "Application Service Providers and the Evolution of the Internet Integrated Enterprise," the major benefit IT executives saw in application outsourcing was a reduction in overall cost of implementation and management. Freeing IT resources for critical tasks and more quickly implementing new applications were also ranked as important benefits.

When it came to listing concerns, survey respondents gave equal weight to security and application performance. They were also concerned about ASPs’ ability to deliver, customize or modify applications.

With server-based computing, ASPs can answer all of these concerns. Regarding security, the only data transmitted over the server-based network are screen updates and keystrokes, so data is always secure.

By dispersing the processing burden in a server-based network, customers are also assured of getting the maximum performance from the network and all applications. And the ability to embed local applications on the thin workstation also gives the ASP the ability to address application modification or customization requirements. With this architecture, the ASP can give customers precisely what they want.

ASP Choices

The server-based system with thin workstations also meshes well with the ASP’s turnkey business model. The majority of ASPs prefer to control operations from a back-end data center, and many are adding round-the-clock help desk support. With a server-based system, help desk personnel can manage all desktop workstations remotely from the data center. This means the ASP can give immediate, comprehensive desktop support with few, if any, on-site visits.

The server-based architecture allows ASPs to respond to the market’s current needs without sacrificing future flexibility. For instance, Citrix ICA protocol requires very little in the way of bandwidth. It works equally well for users who are still using dial-up services and those using dedicated data services.

Furthermore, the low per-unit cost of thin workstations allows ASPs to effectively offer a total application access solution by bundling the thin hardware with the application access services.


The phenomenal growth of the Internet has led to an unprecedented level of connectivity in the marketplace, making it economically viable to deliver software applications as a service. Application hosting makes good business sense for customers because it allows them to reduce overall network management costs to a flat monthly fee while maintaining or increasing productivity.

The key to success is for ASPs to hold down their own costs while delivering guaranteed levels of service on par with what enterprises currently enjoy using networked PCs. Server-based computing built around powerful and flexible thin workstations with embedded operating systems is the best way to provide guaranteed levels of service while holding down costs.

About the Author: Jim Crocco is Chief Operating Officer at Netier Technologies. He can be reached at

ASP Options

Are You a Candidate for ASP Services?

By Sam Amore

How do you know if an ASP would work with your business? ASPs have made more inroads into some industries than others. Manufacturing, government, banking and healthcare are areas where ASPs have been successful. But a company in any industry can benefit from partnering with an ASP, given the right circumstances.

Here are some scenarios that lend themselves particularly well to an ASP-based solution, no matter what industry you are in:

• You are facing a big re-engineering project, or an installation in a new facility

• You need a new application that your existing infrastructure won’t support, or that would require significant staff upsizing and retraining

• Your company is growing so rapidly that scalability of applications is a big issue

• You are in a region with a particularly tight labor market, with high IT-staff turnover and replacement costs

The pace of technological change continues to accelerate, and systems are now becoming obsolete in two years instead of five or ten. Outsourcing to ASPs can reduce your cost and risk of implementing new solutions. It saves you software license fees, absorbing installation costs, and hiring an application administrator and support staff.

Choosing an Enterprise ASP

If you’ve decided that an ASP interests you, where do you begin? There are many different kinds of ASPs, even among individual species, and the category continues to evolve faster than industry gurus can define it. There are no hard and fast rules for selecting one; only some practical guidelines:

• One solution doesn’t fit all, so beware of ASPs that don’t offer a range of prices and service levels. A large percentage of the value you get is consumed by a small percentage of your users, so you may get almost as much out of your ASP by giving 12-hour access to 50 key people as you would if you were paying for round-the-clock support for 5,000 people.

• There is often safety in size, but it may come at the cost of personalized service. Big ASPs can achieve better economies of scale, but they may be less focused. And if they offer a wide range of services, they may be constantly trying to sell you things you don’t want. By the same token, though, going with a small ASP is no guarantee of highly personalized service.

• It is important to understand that immediate savings from partnering with an ASP are not always going to be realized in hard dollars, especially if you are replacing a depreciated system and refocusing IT staff on new tasks rather than downsizing.

• The payoff is longer term, deriving in part from reassigning IT staff resources to more strategic activities that build value by improving the very core of your business processes. Outsourcing to an ASP can also help reduce "soft IT" costs you incur when business managers spend time providing unofficial application support.

• Outsourcing to an ASP does not imply any incompetence on the part of your in-house staff – quite the contrary. In today’s very tight IT labor market, your staff is too valuable to be tied up with relatively monotonous and repetitive work.

• You aren’t losing control when you outsource. By designating a liaison person that holds regular meetings with the ASP representatives, you determine the level of your company’s involvement. Think of the ASP as an extension of your staff, and hire the ASP according to the same standards you’d use to hire your own staff.

The biggest long-term benefit that ASPs can bring your company is flexibility. You don’t get locked into certain technologies that limit your options in the future, and you can embrace the virtual-enterprise paradigm.

About the Author: Sam Amore is a Vice President for reSOURCE PARTNER, an ASP that delivers PeopleSoft applications and business solutions to the middle market.

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