Editor’s note: This is a compilation of two articles that originally appeared in TechRepublic’s ASP Informer TechMail. Subscribe, and you’ll receive the latest information on ASPs.

To begin our discussion on how to choose the right ASP for your organization, let’s look at the complete application service provider (ASP) value chain, which consists of the following:

  • Internet connectivity
  • Data center
  • Hardware infrastructure
  • Operating systems management
  • Applications management
  • Sales organization
  • Business processes
  • Last-mile connectivity
  • On-site equipment

The “real ASP” is the organization that provides management of horizontal or vertical application services, adding some layers to the value chain—including hardware infrastructure, OS management, applications management, business processes, and sales organization—but always with the element of applications management in their portion of the value chain. These ASPs focus on a set of applications or processes they can provide to a broad number of companies. They can do this cost-effectively because they’ve developed installation, operations, and data backup and recovery strategies that make the applications management more efficient than those normally deployed within a company.

Although some organizations may want their service company to provide all the elements of the value chain, many prefer to use providers that focus on providing quality services in some specific segment of the value chain. Some service providers may also choose to provide the entire value chain but restrict their offerings to very specific technologies or business processes.

No one can provide every technology, every application, and every process throughout the complete value chain, so it’s important to understand how ASPs are segmented. This way, you can choose the ASP partner that provides the services you need without requiring you to pay for the ones you don’t use. I’ll explain how ASPs are categorized and what the associated features of each segment mean to an organization considering using the services of an ASP.

What the TLAs of ASPs mean
In addition to the more traditional ASPs mentioned above, there are other types of ASPs that narrow or widen their focus in order to provide specific sets of services for their customers. Because these providers have chosen to service only particular portions of the value chain, the best way to categorize them is by their associated three-letter acronyms, or TLAs. We’ll take a quick look at these segments of providers and what each offers.

Connectivity services providers
The first of these providers is what I call a CSP, or connectivity services provider. This group of companies consists primarily of regional telcos, competitive local exchange carriers delivering circuit-based telecom services (CLECs), and next-generation CLECs that deliver packet-based telecom services (NG-CLECs). These companies focus on delivering the endpoints of the value chain with limited or no colocation capabilities. These companies are good partners for companies who want to do all of the applications support in-house. They can provide affordable, high-speed Internet and private network connectivity (point-to-point or multipoint).

Applications infrastructure providers
The applications infrastructure provider (AIP) builds and manages facilities that allow customers to deploy applications that sit on big servers, fat pipes, and redundant power and connectivity, and pay only monthly service fees for the management of the resources. Some AIPs such as Exodus and Level3 focus on providing the data center, hardware infrastructure, and operating systems management. These AIPs sell their services to large companies that want to move their applications off-site and self-host, and to pure ASPs that want to focus on the applications-management layer of the value chain. Other AIPs, such as Data Return, provide hardware infrastructure, OS management, and applications management, leaving the lower levels of the chain to another AIP partner.

Business process providers
One of the providers focusing on a narrower segment of the market is the group that I call business process providers, or BPPs. These companies focus on a very specific business process and provide the applications management, business processes, and sales organization to support that process. Two specific examples of these include EmployEase, a company focused on providing employee self-service applications for current employees, and Monster.com, a company focused on the recruitment process. The BPP has to be best of breed for the business process on which it focuses and must also integrate with other complementary processes in order to survive.

Developer services provider
Like the BPP, the developer services provider, or DSP, also focuses on a specific segment of the market—independent software vendors, or ISVs. The DSP’s goal is to enable ISVs to develop and host their applications for large numbers of remote users. They provide developer support and help desk services, in addition to providing advanced hardware infrastructure and operating systems levels of the value chain. Many DSPs also install and support runtime subsystems like Cold Fusion or Hahtsite that allow developers to deploy new applications quickly. DSPs also allow developers to work with new technologies more quickly by providing engineering support for new environments faster than the companies can provide them for themselves.

For example, in the last couple of months, several DSPs have sprung up to support development on Microsoft’s .NET platform (still several months from release) and Commerce Server 2000 platform. The DSP provides a fully configured box or boxes with all of the appropriate software installed to support a specific deployment platform. The ISV can test and deploy on the platform and get support for any additional engineering of the platform necessary for its application. The DSP’s challenge is to provide enough customization to make its service compelling to a company’s development group or an ISV (versus simply paying an AIP for rack-mounted boxes) but also standard enough that the DSP can reach some economies of scale.

Full-services providers
Where BPPs and DSPs focus on narrower customer segments with specific segments of the application services value chain, there are full-services providers (FSPs) and managed services providers (MSPs) that provide broader sets of services. The classic FSP is USinternetworking (USi). USi made a strategic decision to build out the entire value chain in order to support its national and international customers. Its focus is on outsourcing complete data processing operations for customers; therefore, it needs to provide the entire value chain.

Managed services providers
Whereas an FSP attempts to move all of the data processing equipment and operations away from a company, an MSP focuses instead on managing (and oftentimes, replacing) the locally installed equipment or applications. An MSP attempts to provide the services that exist across the application services value chain, but to do so remotely while using the customer’s existing infrastructure.

Choose your ASP wisely, and you’ll lower your costs
Other business models (and new TLAs) will emerge as the application services value chain continues to evolve. As consumers of application services, it’s important to partner with a company that provides the services within the value chain that you’re most interested in purchasing. If that company focuses on delivering just those services, then you should get services of a higher quality but with a lower associated cost.

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