Never buy software again? Companies can now rent the programs they need

July 26, 2001
Specialized companies are offering a convenient and cost-effective alternative that lets firms focus on their business and products.

John Sydnor
Vice President of Sales
Fullscope Inc.
Ann Arbor, Mich.

Edited by Sherri Koucky

Manufacturing and engineering businesses are discovering a brand new world of software and data handling, one in which they no longer need to "own" costly and cumbersome software licenses.

Instead, Application Service Providers, or ASPs, offer a convenient and cost-effective alternative that lets companies focus on their own business and products rather than the software.

Traditionally, corporations have purchased software outright. However, software is costly and requires constant upgrades and support. ASPs let companies quickly assemble and rent the software applications they need. This is a boon, particularly for industries where e-business is changing the amount of design and engineering distributed among suppliers. ASPs can even enhance data security. It's always a challenge to work with people outside a company, overcoming network access and security issues. But with an ASP, specifications and project plans can be efficiently and safely shared. ASPs are generally able to demonstrate the effectiveness of physical security on their servers, where the data is actually housed. They can afford the time and money for state-of-theart security systems to transmit data back and forth.

Among automotive suppliers, for example, sharing specs and plans is crucial as OEMs and Tier 1 suppliers depend more on small and medium-sized suppliers for components. But most independent manufacturers can't afford the high-end design and factory automation programs used by the largest suppliers and automakers.

ASPs let manufacturers turn software costs from capital expenditures into operating expenses, reducing initial investment and improving the bottom line. By using ASPs, companies are not constantly investing in upgrades before they see return on the initial software investment. And remember, the best IT department in the world is still a cost that must be carried, not a revenue generator.

Connection is key
ASPs can lower the risk of IT investments and offer one-stop shopping for both billing and support. But ASP users still face the capital cost of maintaining a high-bandwidth connection to the Internet.

ASPs store customer information on central servers, regulating security and information around an agreed upon set of rules and conditions. Although any connection speed and bandwidth will let companies reach the ASP, it usually takes DSL or cable-levels of high-speed connectivity for smooth, reliable server access.

Some companies balk at the price for this connectivity without comparing the costs and benefits ASPs bring to the cost of doing everything in-house.

Breaking the "legacy" curse
Some companies may be reluctant to go with an ASP because of their perceived dependency on existing older systems, even if those "legacy" systems are built around dated technology. ASPs actually help break away from "legacy" systems because they soften the process of adopting new technology and break it into many small steps. ASPs can ease new systems into place without a huge upfront investment and short-term loss of productivity when you completely change the entire data system.

Going with an ASP doesn't supplant a company's current system. Also, it doesn't eliminate the IT department.

You CAN go home again
"What if I don't want to use the ASP anymore? Can I get my data back?" These are questions ASPs often hear in initial consultations. There's usually a way to bring the data back in-house, in part because the relationship between an ASP and a customer is more than just a one-time transaction.

Generally, when users decide they want a particular software package, the ASP sends an implementation team to make a smooth transition. The ASP provides training if necessary and sets up security and limits access. The ASP provides billing and consolidation assistance, eventually combining all software applications into a single custom-built package.

This ease-of-use differentiates ASPs from Value-Added Resellers (VARs), the traditional channel many companies rely on for information-technology support. VARs sell different applications but don't have a platform that integrates additional applications. A platform lets companies distribute applications to specific departments, such as allocating a viewer application to the engineering department.

Some features are built into the platform itself, such as messaging, and the ability to set up work groups and distribute company news, whether from inside the company itself or from the supply base.

Preparing for success
Manufacturing businesses planning to work with an ASP can take some simple steps to prepare.

Set goals for data integration and identify systems that absolutely must be kept in-house during early phases.

Get input from existing IT staff and enlist their help in finding a reputable ASP. The decision to use an ASP may come from the top, but the people most affected will be the actual users.

Choose an Internet browser that meets internal needs, and clear up any Internet connectivity problems.

Decide what kind of software you really want. Then, start bringing in ASPs to describe their offerings. They will all be different. Some will want you to move all your servers over to them, essentially outsourcing your IT department. Others rent only a specific piece of software. A new generation of ASPs provide multiple programs on an integrated platform along with a host of services.

High-end applications will probably not be outsourced to ASPs, nor will general ledger or desktop applications. But tough economic times are expected to challenge companies using collaborative services and applications.

In fact, the right ASP will change existing operations in only one way — it should become easier to focus on real products and profits.

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