Not too long ago, insufficient bandwidth made application outsourcing impractical. New telecommunications technology is removing this barrier, however, and may even make ASPs inevitable for most companies.

In this article, we’ll look at how adjustments in the telecom industry, including lower costs and better cooperation from providers, have made outsourcing a reality for ASP customers.
In a recent report, “The ASPs’ Impact on the IT Industry,” International Data Corporation noted that the hosting center for data services will play the role the central office has played for voice services—only more so. The idea is that robust network-based applications and e-business solutions will be available on a model like that of a traditional utility—something users can tap into and pay for based on usage. In addition, most providers allow customers the option of dialing directly in to the ASP to access applications or using remote access services to connect to their company’s network.
The bandwidth quandary
Jim Holincheck, a Giga Information Group analyst, said the need for increased bandwidth will become a consideration for ASP users, and that will mean an additional investment for many customers.

“In some cases, customers might have to spend additional money in their communications infrastructure to move to ASPs,” he said. “It depends on what they have in place today.”

Holincheck cited the Mining Company, a Giga client that has lately been experiencing high levels of activity at its sites. “Their (wide-area network) is relatively slow,” he said. “It would be an issue for them if they were doing an in-house implementation or using an ASP.” Amy Mizoras, an International Data Corporation research analyst, noted that bandwidth will be a deciding factor for many potential ASP customers. She said that if your systems are slow now, moving applications off-site won’t help. But if your pipes are fat and your current access speeds are decent, she added, service providers won’t slow you down significantly. “The higher-speed bandwidth and access you have, the better you’re going to be from a performance perspective,” Holincheck continued.

ISPs, NSPs offer solutions
Internet service providers are likely to secure a healthy share of the ASP market, experts say.

“The Internet service provider will do 10 to 60 percent more” ASP business, noted Jan-Eigel Rydningen, a spokesperson for the Fort Lauderdale, FL.-based ASP TeleComputing. “Bandwidth usage will explode because many companies will totally use the Internet as their access to their data and their applications.”

Network service providers, on the other hand, will have to adapt and mimic ISPs to compete for their share.

According to IDC, some NSPs will serve as the ASP for select markets, implementing solutions, and providing ongoing end user support. Others will deliver the access, transport, and management services that ASPs need to deliver solutions to end users. In addition, many NSPs will offer high-speed network connections that will allow customers to reduce spending on systems, software, and support staff.

Some networking firms are creating special packages of equipment and partnering with hardware and software manufacturers to provide the technology that ISPs and telecommunications carriers need to offer reliable software rental services online.

Many networking firms will begin to sell hardware like routers and switches so service providers can upgrade their networks. Also, firms will offer virtual private network technology to allow users to access corporate data and software over secure Internet connections while on the road.

Networking firms also plan to offer management software that will allow a network manager to give bandwidth priority to important applications, such as accounting software, over applications like email, to ensure employees always have timely access to shared software.

DSLs speed up access
Other observers say the pressure is on the telecommunications providers to meet the immediate needs of the market. When local digital subscriber lines (DSLs) were deregulated in November 1999, local exchanges were forced to share lines with DSLs.

“DSL lines used to take three months to install; now it will take three days,” said Deepak Amin, CEO of Seattle-based ASP “Deployment is going to go through the roof. DSL providers have become ‘commoditized.’ High bandwidth has become ‘commoditized.’”

Amin also estimated that the cost of DSLs and access over cable will drop at a rate of 20 to 25 percent per quarter. Small businesses and large businesses will now have quick access to high bandwidth and will receive it at a fairly low cost, which should make ASP usage possible.
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