Going ASP: Do You Feel Lucky?

To ASP, or not to ASP? That is the question.

An ASP, or application service provider, manages and delivers software applications to multiple entities from data centers across a wide area network, according to the ASP Industry Consortium, an advocacy group based in Wakefield, Mass.

The advantages for you, the software user, are many. The software doesnt take up space on your hard drive or network; all updates are done automatically by the ASP; theres no installation procedure to worry about; and it just costs less to get software via the Internet than it does to buy a disk and install and maintain it yourself.

The downside is that youre depending on an outside vendor to keep what may be critical software functioning and ready for you when you need it. Youre also putting your companys precious data in the vendors hands, rather than handling it yourself. If the ASP should fail, your business could be in deep trouble.

So the ASP model is appealing, but it also carries considerable risks. This situation brings to mind some dialogue from that cinematic classic “Dirty Harry.”

Harrya San Francisco police inspector known for his violent but ultimately effective methodshas just finished blowing away some bank robbers, firing his gun several times. Now he stands over a surviving crook with his impossibly large weapon pointed at the perpetrator. The robbers hand is on a shotgun, ready to grab it and fire at the detective.

“I know what you’re thinking,” says Harry through gritted teeth. “Did he fire six shots or only five? Well, to tell you the truth, in all this excitement, I’ve kinda lost track myself. But being as this is a .44 Magnum, the most powerful handgun in the world, and would blow your head clean off, you’ve got to ask yourself one question: Do I feel lucky? Well, do ya, punk?”

He didnt. As it turned out, Harrys gun was empty, but one could hardly fault the crook for not taking the risk.

Its somewhat the same when it comes to the ASP model in insurance. Sure, the benefits are attractive, but the downsidepossibly losing ones data or being unable to do businessmay be catastrophic. Companies in this industry are understandably cautious about ASP.

“Everybodys trying to come up with an ASP model for insurance,” says Judy Johnson, vice president, insurance information strategies, for the Stamford, Conn.-based Meta Group. “I personally wouldnt give any mission critical applications to any current insurance ASP vendor. Lots of insurance [software] vendors are talking about doing it, but insurance vendors as a group are not that great at delivering the services they want to do.

“Its just like outsourcing your business,” she continues. “You put your credibility and brand in the hands of someone else. Your ability to do business is in someone elses hands.”

“Having my data on someone elses system is a legitimate concern,” concedes Jim OReilly, communications director for the ASP Industry Consortium. “But look what happened when people started outsourcing payroll.” There was great initial concern, he says, but eventually the practice became widespread among companies. “The same thing is happening here.”

OReilly asserts that ASPs losing their ability to service clients is “not a widespread problem,” but he adds that companies who choose the ASP route need to make allowances for it and “build it into your service agreement [with the ASP]. Get it in writing.”

According to OReilly, “we want our systems to be available 99.999% of the time, but is that a realistic expectation?” One question a potential ASP customer needs to ask is whether or not the company needs its systems to be up without fail.

When it comes to security of computer systems, however, ASPs excel, since “its their business,” says OReilly. Most small businesses tend to have “a server down the hall in a closet with a fan cooling it,” he observes. The server may not be behind a firewall or physically protected from problems like flooding or from vandalism.

To help boost customers confidence in the ASP model, the Consortium says it is about to make available insurance that is “pre-targeted” toward ASPs. ASPs could choose between a version with E&O coverage and one without.

The insuranceoffered by AIGwould protect ASPs against potential losses from an inability to provide service, among other things, says OReilly. He adds that knowing an ASP has this kind of insurance to prevent financial failure may then give customers more confidence in “pulling the trigger” to get their software capabilities from the ASP model.

OReilly says the insurance will be available to any ASP, but Consortium members will receive “a significant discount.”

Another view of the ASP question comes from James Bisker, senior analyst, insurance, with the Tower Group, Needham, Mass. “The ASP model is valid for insurance, but not necessarily for core systems,” he asserts. Core systems, he adds, are those that are critical to the functioning of ones business.

Over time, Bisker believes that agents in particular will develop “a trust relationship” with the Internet, which will make them less afraid of negative consequences. “Its not happening today,” he adds, “because we have to get over 400 years of insurance-think.”

While he thinks good models for ASP delivery of agency management will eventually prosper and that data sharing will be less fear-inspiring, Bisker cautions that “the agents may want to jealously hold their prospect book.”

So there you have it, potential ASP customers. What do you think? Do you feel lucky?

If your answer is “yes,” here are a few tips to make your foray into the world of ASP a bit less risky.

First and foremost, back up your own data. Most ASPs will probably handle your data with the care it deserves, but just in case something unforeseen happens (a direct lightning strike will fry any system), the lifeblood of your business will be safe on your premises.

If youre worried about the cost, consider tape-based backup systems that are comparatively inexpensive and can hold gigabytes of data. Just be sure to refresh any backup files kept longer than seven years (which is usually how long you can count on tape to retain your data intact).

Also, visit the offices of any potential ASP before you sign on the dotted line. Check out their security measuresboth software and physicaland ask whether or not their systems are mirrored at a remote site (a most desirable advantage).

Bisker suggests that ASPs provide customers with a “basic version” of the purchased software on compact disc. That way, if your Internet connection goes down (and whose doesnt from time to time?), youll be able to continue working.

A final piece of advice. When it comes to any software application to be accessed via an ASP: If youre in doubt, keep it outout of your ASP contract, that is. Time and experience with your ASP may convince you to trust more of your software needs to the ASP later, but keep the comfort level high for your company by playing it close to the vest to start.

Taking the proper precautions regarding ASPs can remove a few more live shells from the metaphorical .44 Magnum thats aimed at your systems and your business.


Reproduced from National Underwriter Life & Health/Financial Services Edition, August 6, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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