Contract Management Made Easy
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By now, you've probably heard the abbreviation "ASP" more than once. What does it stand for? Application
Service Provider. Should you care about ASPs? -Absolutely.
ASPs are outsourcing services that help small- and medium-sized companies implement sophisticated
business software without having to make a big, time-consuming investment.
Some ASPs are full-service firms -- developing, delivering and maintaining specific applications. Others are
intermediaries -- providing a developer's software to different end-users.
Example: Small companies can leap into selling on the Internet by contracting with one of the many ASPs,
such as USinternetworking, www.usinternetworking.com, that support the various -- and potentially costly --
technical aspects of on-line selling.
QUICK, AFFORDABLE ACCESS
Fast implementation is one of the prime selling points of ASPs. Just how fast? It depends on the level of
sophistication of the service needed and how quickly employees can be trained to use it.
A simple service, such as management of a small network of PCs, could be up and running in just days.
Example: Low Country Day School, a small, private school of 200 students in Pawley's Island, South
Carolina, had severely limited funds... obsolete computers... and teachers in need of training. There was also
no on-site technical support staff.
It wanted to offer up-to-date educational tools to its students and teachers.
Solution: LearningStation.com -- a Charlotte, North Carolina-based ASP -- leased to the school "thin client"
PCs requiring very low maintenance and delivered educational software and training on a per-user, per-year
basis.The systems are operated and supported by LearningStation.com via the Internet.
Result: Within a very short time, Low Country Day School acquired a complete technology package including
PCs, Internet connectivity, student and teacher software applications, training and support.
Cost: About 42¢ per student per day, which is paid on a subscription basis to LearningStation.com. This is
far less than the cost of conventional licensing of basic education software packages.
MORE COMPLEX CHALLENGES
Less-than-one-week implementation is unrealistic for complex enterprise resource planning (ERP)
applications.
These sophisticated software programs coordinate the different operations of a business and help it operate
more efficiently than if human management were relied on to do the coordinating. Even for smaller
businesses, this can take months.
Example: Prayon, Inc., of Augusta, Georgia, went through an ASP to contract for SAP, a leading ERP program.
Prayon is a 110-employee supplier of phosphates to the food and pharmaceutical industries. It had been part
of one of the chemical giants with extensive computer facilities that supported its previous long-term use of
SAP.
When Prayon was spun off to a Belgian chemical producer, Prayon-Rupel, that support was lost.
According to Missy Wright, Prayon's supply-chain manager, the company was not big enough to buy larger
computers or hire experts in all of the functions of SAP that Prayon uses or plans to implement. Over the
Internet, the ASP supports these SAP functions for Prayon's employees -- sales, distribution, materials
management and finance.
Profitability analysis and maintenance will soon be added.
Specifics: Prayon entered into a three-year contract with its ASP with a 90-day termination clause. The ASP
provides training at no extra cost. This outsourcing deal must be working well because Prayon's Belgian
parent is planning to do the same.
SPECIALIZATION OPTIONS
Some ASPs offer industry-specific services.
Example: Customs brokers -- and high-volume importers who handle their own customs clearance -- can
now obtain all of the documents needed to import goods into the US from Smartborder,
www.smartborder.com. This ASP slashes the effort needed to prepare complex import documents -- which
users can complete on-screen -- by as much as 70%.
Smartborder charges clients per use, with fees running as little as 10¢ per document.
WHERE TO START
How do you find ASPs that serve your industry? In addition to scanning ads in business publications or
picking up leads through the grapevine, you can contact the Application Service Provider Industry Consortium
(ASPIC) in Wakefield, Massachusetts.
This association -- with nearly 700 members -- has a public membership list that can be accessed on the
Internet at www.allaboutasp.org or by calling 781-246-9321.
The Web site also offers advice on how to select and contract with ASPs. Steps to take...
Check the ASP's financial background. In addition to comparing costs and services, check into the ASP's
financial stability. Many ASPs are young and have limited business track records.
Compare levels of support. Level of support is a prime concern. If problems arise, how quickly does the ASP
come to the rescue?
Check with current customers, especially those similar in size. If the descriptions you get from an ASP's
existing customers are less glowing than "excellent," consider moving on to another prospect.
Assess confidentiality. An ASP that serves similar or even competing businesses raises the question of
guarding business secrets.
Make sure that there are strong barriers between clients' databases. You don't want your competitors
accessing your data -- especially customer names and history.
Forget "standard" contracts. Conventional outsourcing service providers generally begin negotiations by
offering standard contracts. With ASPs, don't hesitate to demand more -- especially in levels of service.
Example: The contract may specify average responses within "one minute." That's not quick enough. See if
you can get the ASP to guarantee five-second answers for your customers.
Make sure the ASP has adequate capacity. The ability to handle sudden high volumes of computer activity is
a key consideration.
Example: For most of the year, your accountants may query your off-site, ASP-supported financial database
only once or twice a day. However, at income tax time, queries may jump 1,000%.
Can your ASP cope with such increases, especially when many of its other clients are doing the same?
Include a dispute-resolution procedure in the contract. After the "honeymoon" period, disputes may arise over
your ASP's performance or charges. Some avenue for amicably resolving such disputes should be included
in the contract.
