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Customer evaluation of application services provisioning in five vertical sectors

  • Research Article
  • Published:
Journal of Information Technology

Abstract

How value is created for the customer from e-business is a topic of much concern in academic and practitioner circles. In the light of the dot.com downturn, numerous e-business firms ceased to exist. This paper reports the findings from an ongoing research study on the development and decline of the application service provider (ASP) industry. Having witnessed the decline of the first wave of ASPs, with many failing to convince small and medium businesses (SMBs) of the value of adopting an ASP solution, the second wave calls for a more rigorous approach that clearly identifies the key performance areas and indicators of the ASP business model. Applying the constructs of strategic positioning, product/service portfolio, and value proposition, this paper represents the findings from 215 responses to a questionnaire survey on how potential and existing ASP customers evaluate the benefits and risks of ASP. The findings suggest that, if the ASP model is to succeed, vendors will need to carefully identify customer requirements and avoid the pitfalls that beset the first wave of the ASP model, which was largely based upon a technology push strategy.

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Notes

  1. These authors deconstruct e-business models in an attempt to delineate their different attributes and value-creating potential for customers. The eight atomic e-business models are: direct to customer; full service provider; intermediary; shared infrastructure; value net integrator; virtual community; and whole-of-enterprise/government (see Weill and Vitale, 2001: 21).

  2. Many horizontal ASPs (Salesforce.com; Netledger, etc) charged in the region of $20–60 per month, per seat for their software applications. Reliability, scalability and accessibility (RAS) is therefore important in this market.

  3. Research funding was obtained from the Engineering and Physical Sciences Research Council (EPSRC) for a study on ‘Assessing the benefits and risks of business critical information systems using application services providers; and from the Economic and Social Research Council (ESRC) for ‘A study on vertical and horizontal ASP business models’. Industrial collaborators included: Cable & Wireless a-Services™; Netstore (a leading European ASP); Ernst & Young; ICI chemicals; KW International; Keystar; Fullard Learning and DCS.com.

  4. The ASP Industry Consortium was one of many membership organizations designed to promote the ASP business model. This was a useful website since it contained lists of many ASP firms.

  5. The questionnaire survey was premised on the basis that many SMB respondents were not currently using an ASP (or outsourcing their IT), but were potential ASP customers. It was therefore important to draw a comparison between existing and potential ASP customers.

  6. From 1999 to 2001, the hype surrounding e-business was echoed by ASP vendors, many of whom produced expensive and glossy marketing literature on a range of customer benefits from using an ASP. These benefits (and risks) were captured in the questionnaire survey, not to measure if they were being met, but rather to ascertain whether they were important to customers.

  7. The ASP Industry Consortium adopted only four categories: Delivery; Integration; Management and Operations; and Enablement. Pilot Research conducted in Silicon Valley suggested that the categories of delivery and enablement largely overlapped as enabling remote access to software applications also included many delivery issues. For this study, these categories are therefore merged. Additional categories were also relevant, such as client/vendor alliances/partnerships and business transformation.

  8. Cable & Wireless a-Services was set up in November 1999 to become a full service provider (FSP) with an initial offering of collaboration tools (MS office and Exchange) moving onto more complex business critical software such as ERP and CRM. Failure to win customers resulted in its closure in November 2001 with the loss of many jobs.

  9. The one-to-many approach is where the same software application is delivered to multiple customers/sites/departments. This enables the ASP to achieve economies of scale. For example, Concur offers a travel and expenses package which does not need to be customised. This ‘horizontal’ offering can therefore be used across industry sectors and priced on a subscription model.

  10. aspnews.com provides monthly reports of the top 20 ASP providers and top 30 ASP Infrastructures. This is a useful site for tracking the performance of firms within the ASP industry.

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Acknowledgements

We thank the Engineering and Physical Sciences Research Council (EPSRC) for providing research funding to investigate ‘Assessing the benefits and risks of business critical information systems using application services providers; and the Economic and Social Research Council (ESRC) for funding, ‘A study on vertical and horizontal ASP business models’. In addition, we offer our thanks to the numerous firms who completed our questionnaire survey and the case study firms. We also thank the Associate Editor for providing useful advice and guidance on improving the paper.

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Authors and Affiliations

  1. Department of Information Systems and Computing, Centre for Strategic Information Systems, Brunel University, Uxbridge, Middlesex, UK

    Wendy L Currie, Bhavini Desai & Naureen Khan

Authors
  1. Wendy L Currie
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  2. Bhavini Desai
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  3. Naureen Khan
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Corresponding author

Correspondence to Wendy L Currie.

Appendices

Appendix A

ASP vendor firms

Table a1 ASP vendor firmsa
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ASP customer firms

Table a2 ASP customer firmsa
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Appendix B

ASP Customer Evaluation Questionnaire

1. Your Company

Table

Table a3 1. Your Company
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2. IT Outsourcing

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Table a4 2. IT Outsourcing
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2.1. What software applications do you outsource?

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Table a5 2.1. What software applications do you outsource?
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3. ASP

Table

Table a6 3. ASP
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Table

Table 10
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Table 11
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4. Performance Measurement

Table

Table a9 4. Performance Measurement
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Table

Table 13
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Currie, W., Desai, B. & Khan, N. Customer evaluation of application services provisioning in five vertical sectors. J Inf Technol 19, 39–58 (2004). https://doi.org/10.1057/palgrave.jit.2000006

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