What can application service providers offer manufacturers that they can’t achieve for themselves? Annie Gregory cuts through the ASP controversy and assesses where it works best, how and why.
Manufacturing analysts aren’t keen on ASPs. AMR points out that in 1999 many – if not most – had little or no revenue. The consensus seems to be that ASPs provide an adequate mechanism for handling non-core functions like payroll and help-desk, but have little to offer manufacturing operations.
It was a view seemingly endorsed by industry … until recently. As MCS’ feature (MCS, March 2001, page 30) on stairlift manufacturer Minivator’s project with ASP e-know.net illustrates, opinion could yet shift.
So let’s take a fresh look. First, the fundamentals: an ASP hosts all or part of a company’s enterprise applications from its site. It manages and maintains them and makes them available on demand over a network, dedicated line or the web. The client signs up for a period (normally five years) at a monthly fee. There are no hidden costs, no surprises. At the end of the contract, either party is free to negotiate a further term or walk away.
Simple? No. For a start, the focus and type of service varies massively from ASP to ASP. Although all provide the hosting, some take responsibility only for applications they author. Third party, or in some cases all, applications remain the responsibility of the manufacturer. Clearly, this isn’t much of a problem with payroll. It is, however, with more complex software that’s fundamental to, say, planning or production. One of the drivers to ASP is to avoid using scarce IT resource on system admin. This approach seems to promise all the pain and none of the pleasure!
Very few ASPs provide a full service, integrating a range of applications to suit a business. e-know.net is one: it stresses its ability to unite a ‘best of breed’ mix into a single service, with a single point of contact. It calls this “pureplay”. And e-know.net differs in another important respect: it is the only true ASP solely focused on manufacturing.
That’s critical. To understand why, we need to take a look at just how conventional ASPs make a living. Simon Bragg of analyst ARC explains: “[ASPs] have large capital costs and expensive consultants so they have to charge accordingly. They are generally looking to pay off those costs over three years, so that leaves two to make their money.”
It’s about economy of scale: ASPs can afford better skills because they amortise the costs over several clients. That can work for ASP and client alike, but if the skills are too general, Bragg says it works against manufacturers. “By the time a manufacturer has parameterised an application, it’s unique. You need someone who understands what the business is doing and can work with it. If your ASP doesn’t, where’s the economy?”
The pragmatic approach
This kind of ASP also earns its way by supplying standard packages – customisation, if offered, is likely to be expensive. And that’s bad new for manufacturers whose competitive edge depends on critical variations in business process. If I had only one warning to give users assessing ASP, it would be: “Beware the company that will provide you with only one application in a critical area and insists you take it in its standard form. You are supporting your ASP’s business but they aren’t returning the compliment.”
e-know.net takes a pragmatic approach specifically for manufacturing, helped by the fact that its principals notch up more years manufacturing experience than some large consultancies. This ASP can accommodate any choice of software: it has a ‘tried and trusted’ core, but according to senior consultant Ian Burrows, that’s not imposed. “If someone has a system whose administration it wants to outsource, that’s no problem. We will work out a sensible, practical route, then take responsibility. Our people have seen it and done it every which way – we bring something to the party non-manufacturing specialists can’t.”
The company also insulates users from multiple sources of IT support. e-know.net says its service is stronger because it combines its own project management skills with its partners’ abilities. “Partnerships and alliances have more weight and value when there is a similarity of background and focus,” says Burrows.
What about customisation? Burrows: “In an ideal world customers and ASP alike would want standard, but we accommodate modifications. Many software vendors make money by customising. We do it when there are good commercial reasons. Most are only too aware that it is to be avoided unless strictly necessary.”
There are good reasons for this. e-know.net is unusual in offering free upgrades. If the software has been heavily customised, that’s more difficult. Compare this, however, to the normal ASP response –a flat refusal.
Author: Annie Gregory