Application Service Providers: Partnering With Integrators Is Key to Success

Application Service Providers: Partnering With Integrators Is Key to Success<@VM>Application Service Provider<@VM>Small Agency, Big Move

Michael Titmus

When the application service provider model first arrived on the scene a few years ago, many ASP vendors decided to take on the requisite integration work themselves even as many systems integrators thought they could simply add the ASP service to their bag of tricks.

However, with the maturing of the model, which allows organizations to outsource their applications and related tasks to remote third-party vendors for a monthly or yearly service fee, ASP vendors and systems integrators are recognizing that partnering with each other is a more effective course.

"More and more, the ASPs that realize what it's going to take to be successful are taking a step back and saying, 'We've got to do one thing really well, and leave the professional services work to the experts,' " said Laurie McCabe, vice president of Summit Strategies Inc., an IT consulting firm in Boston. "A lot of systems integrators realized the ASP model calls for a different set of skills than they possess or are willing to invest in, such as 24-7 oncall support. A lot of people now recognize it's a better model if people can partner."

The number of partnerships in the government space makes the case. For example, USinternetworking Inc., an ASP in Annapolis, Md., has hooked up with systems integrator Accenture in Reston, Va., to provide PeopleSoft Inc. financial packages at the Federal Energy Regulatory Commission and Minerals Management Service.

Systems integrator American Management Systems Inc. of Fairfax, Va., relies on ASP Digital Island Inc., San Francisco, to host its BuySense e-procurement solution for the commonwealth of Virginia and other state and local government clients.

And CyLex Systems Inc., an ASP in Boca Raton, Fla., is teamed with Pride Enterprises, a systems integrator in St. Petersburg, Fla., to provide a hosted document management solution for the Florida Department of Highway Safety and Motor Vehicles.

Quick Growth
The ASP market is speeding along at a compound annual growth rate of 89 percent, with projections calling for it to increase from just under $1 billion in 2000 to nearly $24 billion in 2005, according to IDC, an IT research firm.

"It's really an issue of core competency," said Todd Singleton, associate partner for the federal government sector at Accenture. "We do what we do best, and they do what they do best, and we don't get in each other's way."

ASPs, in fact, offer a number of benefits to systems integrators, including expertise in managing applications and world-class data facilities at a reasonable price.

In the case of the Minerals Management Service project, USi had invested so heavily in disaster recovery and security at its data center, agency officials felt comfortable in turning over their operations data to an outside vendor.

"A partnership positions us to be able to deliver solutions to our clients much faster," said Michael Titmus, vice president and chief technology officer for the state and local government practice at AMS. "We don't have to get equipment for our clients, and the facilities are available and ready to go."

For ASPs, integrators bring to the table well-established relationships, applications expertise, the ability to tie in legacy systems on the back end and the kind of personalized, high-touch services that clients still require onsite.

On the Federal Energy Regulatory Commission contract, for example, Accenture originally won it back in 1997 and brought on USi to host the financial application after the integrator had developed a strategic modernization plan and implemented process changes and systems in line with that plan.

Having a systems integrator onboard is a necessity for young ASP vendors looking to distinguish themselves among the hundreds of potential competitors also hoping to tap the government market.

Initially, government agencies were cautious about using the ASP model, but as the vendors have matured and begun partnering with systems integrators, federal agencies have warmed toward the concept. Among those who have taken the plunge recently are the Federal Railroad Administration and the Federal Aviation Administration, both of which have applications hosted at USi.

The Army Materiel Command now has SAP AG supply chain and financial applications hosted at SAP, which is acting as the ASP, as part of its larger Wholesale Logistics Modernization Program.

"Oftentimes, if not all the time, these integrators have very long-standing, robust, deep relationships with different federal clients, so these guys have worked there for many, many years on any number of different IT implementations or efforts," said Chris Walker, a spokesperson for USi, which has also partnered with major integrators like PricewaterhouseCoopers of New York, Science Applications International Corp. of San Diego and Computer Sciences Corp. of El Segundo, Calif.

For that very reason, Connectria, an ASP in St. Louis, is planning to explore an alliance with World Wide Technology Inc., a government integrator also based in St. Louis.

"It's really a business development function, a chance for broader market coverage," said Rich Waidmann, chief executive officer of Connectria.

CyLex Systems, which already has state and local customers, is seeking integrators to help it break into the federal realm.

"We're looking at integrators that are actually working with the government, that have GSA schedules and are involved in large contracts already," said vice president of sales Dennis Leibl, who notes the company is already talking to three integrators in Northern Virginia. "We think that's the best way to win government projects."

Although an ASP-integrator partnership is a winning proposition for everyone, including the client, setting up a successful one requires the same planning as any other type of alliance. The companies must answer questions such as who owns the customer, and who will be the point of contact for the customer. There also must be a clear delineation of responsibilities.

On the Federal Energy Regulatory Commission contract, Accenture handles the relationship management and is responsible for ensuring that service-level agreements are met. Accenture maintains and manages the PeopleSoft application software, applying patches or updates as necessary and designing, building and deploying any application enhancements that the client requests.

USi oversees the telecommunications between the commission and the USi National Data Center and maintains the technical infrastructure layer, which includes the operating system, the servers, the database and all physical and electronic system security.

"A good ASP will have very, very clear rules of engagement," McCabe said. "That's what a system integrator needs to look for, because otherwise, there will be question marks and trust issues."

Despite the trend toward partnering, a number of systems integrators continue in the ASP role. Accenture has an ASP offering, and Electronic Data Systems Corp., an integrator in Plano, Texas, is so involved that it recently reached the No. 9 position among all ASPs worldwide, according to IDC, an IT research firm in Framingham, Mass.

The decision to act alone or go with an ASP partner depends on the complexity of the project and the client's needs.

"The single most important criterion is what is the best solution for that particular customer for whom we're providing the service," Singleton said. "We are willing to work with different ASPs, but it's a matter of matching up the client's business needs with the combination of services and skills that Accenture or the potential ASP can provide."A computing model that allows organizations to outsource specific information technology needs to an ASP vendor. The end users "rent" applications from the ASP much like a utility by accessing the ASP's remote servers and applications via the Internet or private network.
ASP vendors take care of the initial capital investment required for running an application; vendors also keep software versions updated and consistent across the enterprise. Customers pay a service fee on a per-use, per-month or per-year basis.

An ASP provides the advantage of any outsourcing arrangement: The customer obtains high-quality applications and service without having to make the in-house investment in equipment or staff.When the American Battle Monuments Commission decided to integrate its accounting systems using the PeopleSoft financial package, it chose to use an application service provider, despite the fact that, at the time, many federal agencies were still hesitant to embrace the new model.

The commission wasn't trying to be bold, edgy or revolutionary, said Col. Tony Corea, director of operations and finance for this tiny 370-employee agency.

"We didn't have a choice, really," he said. "We don't have adequate IT resources within the organization, because we can't pay people what they want or need."

The commission, a little-known independent agency, maintains America's military cemeteries and memorials located overseas, and recently raised more than $170 million for the proposed World War II Memorial in Washington. Its work is conducted out of four offices located in Paris, Rome, Manila, Philippines, and Washington.

USinternetworking, an ASP in Annapolis, Md., that specializes in PeopleSoft Inc. packages, was chosen to host the application, and its partner PricewaterhouseCoopers, New York, will integrate the application with back-end legacy systems located at commission sites.

The solution is still being implemented and is expected to go live in October.

Besides taking away the operational headaches of running and maintaining an integrated accounting system across four different sites around the world, USi will provide help-desk support to end users.

"Even though it's costing us quite a bit per month and per year in operating costs, we don't have to maintain the information technology staff to do that same job, and we don't have to worry about anything," Corea said. "We don't have to worry about telecommunications links, setting up the system, keeping it upgraded nothing."

About the Author

Heather Hayes is a freelance writer based in Clifford, Va.

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