The ASP Aftermath: Considerations and Calculations in the Outsourced Relationship

By Dawn Marie Yankeelov

Once you’ve signed with an Application Service Provider you may be so relieved, it’s off to another IT issue. However, during the early months you will begin to measure whether your needs are met or unmet in practice. And, then there are remedies or upgrades that may be required of the ASP or yet another ancillary, but support vendor, such as training for your internal IT staff.

Timing of Performance Benchmarks

“The true measure of your ASP relationship is service and delivery,” said Jim Clishem, CEO of Xodiax, a Louisville-based data center that works with ASPs as clients. Clishem suggests it will be a four-to-six month cycle of evaluation before you can be sure of the primary performance metrics: redundancy, availability, and reliability.

Dave Nass, Global Partner of Solutions Operations for Accenture (formerly Andersen Consulting) in Chicago, agreed that a certain amount of time should be allowed to an ASP for stabilizing operations and putting appropriate customer support into action. He suggests that, as a rule of thumb, basic messaging and email services should be stable in a month. More sophisticated applications, such as time and expense reporting, should be stable in four to six months. In highly complex ASP installations involving Enterprise Resource Planning (ERP) software from SAP or similar vendors across multiple countries should be given up to a year to shakeout all concerns.

Nass pointed out that while outsourcing as a concept has been around for many years in the IT community, the traditional Accenture Fortune 1000 clients are accustomed to up to five year contracts. Often there are issues of great importance, such as pension liability and large expenditures that had to be weighed in. “Many ASP models allow for far less expenditures than in the past. ASPs are often far less sensitive to contract duration, and offer a cleaner transaction than other outsourcing options,” he added. The typical ASP contract is two years; some are now offered at three years with renewable terms.

He said his consulting often involves defining the role of an ASP, or, in some cases, multiple partners for his clients. ASP as a term can refer to hosted applications, web-based outsourcing, business service providers (BSPs) who offer consulting, and alliances with third party hosters, data centers, and other telcom companies.

Going Up or Down in Seats

The test of time rules for an ASP often come down to the terms negotiated for growth or shrinkage. ASPs are typically selling seats in a subscription model on a per seat/per month charge. Terms are generally spelled out as to the caps or collars on growth or downsizing. If not, Accenture and Xodiax counsel clients to ask questions even after a contract closes. These terms can be renegotiated, if circumstances change in big ways. Notably for growth terms—seat subscription terms can be negotiated to be more favorable to your favor.

Multiplying Complexity with Multiple Vendors

If one ASP relationship has been useful, it doesn’t always stand to reason that two or three are better. “This is going to require a serious look at the affective user communities. If the communities don’t overlap, then there will be minimal complexity in multiple relationships,” explained Nass. It is when a customer attempts to launch several ASP relationships at once that the complexity becomes overwhelming to an internal IT department. “When you start getting overlapping initiatives in the same user community, two or three is all that can be truly handled under the best of circumstances,” Nass said. He said vertical ASPs could compliment the use of a messaging email ASP, given the right scenarios.

Accenture encourages customers readied for multiple ASP plays to look at ASP aggregators, like Jamcracker. Jamcracker, in part funded by Accenture, assists in finding the right players and offers one SLA, one set of passwords for logins to multiple ASPs and other simplifications for clients.

Clishem at Xodiax suggests a three phased approach to decision-making from doing homework to extended interview to trial period before settling on several ASP choices. “Pragmatically it is just so much easier to manage fewer relationships,” he said.

Asking for Help

Once in an ASP relationship success or failure may be keyed to whether you ask for the necessary support—both on a customer service level relating to the ASP’s help desk services, and in adjunct training.

There should be three tiers of customer support offered by the chosen ASP vendor: (!) first call where 50% of all concerns are solved; (2) user help which means advanced technical support; and (3) guru level or access to system engineers, when necessary. Nass at Accenture said he believes most ASPs do well at tier 2 support, but many expect the customer to handle tier 1 calls internally. “If customers as a rule believe they will get good tier 1 support, they will get disappointed,” Nass said.

The metrics to use for evaluation of an ASP is how many calls get resolved within the agreed upon timeframe.
Training may be required on some applications within a user community, even though most ASPs attempt to bypass this service offering with low-end, no training needed solutions. “In most cases, an end user doesn’t just sit down and figure it out. It is never too late to ask about training the trainers inside your company,” said Nass. Vertical ASPs may be able to recommend training partners, but it is not advisable to rely on an ASP for all your internal training needs.

Legal Counsel and Remedies

First and foremost before finalizing a contract with an ASP, several individuals within your organization should be consulted outside the CIO. Since ASP contracts include Service Level Agreements which are nontrivial to mission-critical data, a company attorney or outside legal counsel should be consulted. In addition, the business sponsor of the service or affected department needs to sign off. “Often this signoff is more important than the CIO in actual implementation issues. The CIO must be included because of standards, compliance, and interoperability,” Nass said.

Even after launch, coupled with internal inter-departmental support, the SLA and the ASP contract terms should be reviewed by the company attorney. Customers of ASPs can always go back to the negotiating table on the SLA, confirmed Clishem and Nass.

The Service Level Agreement often becomes one of the most sensitive documents to be signed or renegotiated, based your need for uptime. An average SLA will promise up 3 “9”s or uptime 99.9% of the time with some penalty time. No matter what an ASP presents, it is up to you to ask for a custom SLA that you can live with. “You must look at it as you would a disaster recovery plan. Understand the critical-ity. We encourage clients to push back and ask for what they really want. Some managed service providers like Loudcloud offer a 100% guarantee,” said Nass. The most critical question is not how many “9”s are offered. It is: what’s the remedy? Some price points for downtime do not adequately compensate a corporation for its downtime.

There is no list of industries that should play more attention to an SLA than another. “Any customer with mission critical data is one that needs an adequate SLA,” said Clishem.

He uses the following questions as a data center to determine the appropriate service level:

1. Will your customer’s monies not come in due to the downtime? This would be especially true in an ecommerce environment.

2. Will you lose an opportunity to save costs? This would be true in a transportation company, such as an airline that uses an online reservation system with other applications.

3. Will you lose good will if your application doesn’t run either within your company or with your customers? This might be true especially in organizations or trade associations.

At this time there is no “Better Business Bureau” concept in place policing ASPs. Some ASPs voluntarily participate in certification programs. For example, IBM puts its data centers involved in hosting through an ISO 9000 team assessment.

Clients with more than $60 million in revenues using an ASP should spend the time getting acquainted early on with their ASP. “See where respective companies are going early on and see if this fits with your corporate vision of where you are going. An ASP relationship should be a robust and thick relationship,” Nass said.