ASP — A Step Beyond Outsourcing

Too many people these days are using the terms outsourcing and ASP as if they were interchangeable. They're not. Outsourcing is no more than a small subset of service provision. It means letting an outside provider take over and run something that your company already has in operation. Service provision covers everything else that outside contractors do for you, particularly those activities that you have never had any interest or skills in performing.

Why is this important? Because it makes companies approach the question of whether to use an ASP from the wrong perspective. Only a minority of companies ask ASPs to operate applications that they already have in-house. Most approach ASPs so that they can get the benefit of computing resources that they would never dream of owning and operating themselves.

Outsourcing, on the other hand, starts from an assumption that the customer already thoroughly understands the activity that's being outsourced. It involves highly detailed contracts and service level agreements that have been hammered out by equal parties who both know exactly what they're talking about. That's fine for the small minority of ASP customers who are outsourcing existing enterprise applications and can draw on the skills and knowledge of their own full-time IT experts.

For businesses that are turning to ASPs to deliver completely new capabilities, this level of fine detail is an absurdity. They have to trust the ASP to provide an appropriate service, in exactly the same way that they trust their accountant, their bank and their telecoms provider to just get on and do a professional job. They have no interest in learning how to do the job themselves so that they can evaluate how well it's been done. They simply look for results. On those rare occasions when the results disappoint, they either seek a satisfactory explanation or else take their business elsewhere.

Infrastructure Evaluation
This is particularly true of smaller companies. The Fortune 500 already have infrastructure that is as good as anything most ASPs can provide. If they decide to use an ASP, it will usually be an outsourcing decision, one that evaluates whether the ASP can adequately stand in for what they already have.

The fact that many Fortune 500 companies already make that outsourcing decision in favor of colocation, managed hosting and ASPs demonstrates the growing maturity of the Internet computing infrastructure that is operated by providers today. The corollary is that any infrastructure operated by smaller companies is already inferior and is rapidly falling further behind.

For smaller companies, any elements of their business that need connecting, automating or delivering online will be better served today if they use outside service providers in preference to attempting an in-house solution. Most likely there's a choice of candidates that will do the job, and do it far better than the average enterprise could achieve in-house. Only rarely will it be impossible to find a provider with the necessary resources and skills to provide that service.

In the past, the only computing that existed was owned and operated by the companies that used it. When providers started to offer computing as a third party service, the easiest starting point was to offer outsourcing of what those companies already had. Today we have reached the next generation, when computing has become a service that most companies access from third-party providers. That means enterprises can refocus their energies on running their own businesses, and let ASPS worry about running their computing.

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