ApplicationApplicationServiceService

Providers Providers

Kimberly BerrymanKimberly BerrymanJames James HerbermannHerbermannJennifer RichardsonJennifer Richardson

Application Service ProvidersApplication Service Providers

Software as a serviceSoftware as a service Enablers Enablers vsvs providers providers Stand alone versus multi-serviceStand alone versus multi-service AdvantagesAdvantages Disadvantages and risksDisadvantages and risks Proposal to utilize Proposal to utilize ASPsASPs to minimize to minimize

costscosts

ASPASPSoftware as a service - Software as a service - SaaSSaaS

Service is the distinction Service is the distinction (Microsoft, IBM, & Amazon sold things)(Microsoft, IBM, & Amazon sold things)

IntangibilityIntangibility –– cannot be seen, tasted, heard or smelled cannot be seen, tasted, heard or smelledbefore purchase.before purchase.

VariabilityVariability –– Depends on the who, when, where, and Depends on the who, when, where, andhow.how.

InseparabilityInseparability- Provider-customer interaction impacts- Provider-customer interaction impactsvalue.value.

PerishabilityPerishability- Cannot be stored for peak times, all- Cannot be stored for peak times, alllevels must be available when customer wants it.levels must be available when customer wants it.(studies suggest this doomed the earlier launch)(studies suggest this doomed the earlier launch)

Application Service ProvidersApplication Service Providers

Software as a serviceSoftware as a service Enablers Enablers vsvs providers providers Stand alone versus multi-serviceStand alone versus multi-service AdvantagesAdvantages Disadvantages and risksDisadvantages and risks Proposal to utilize Proposal to utilize ASPsASPs to minimize to minimize

costscosts

Enablers versus ProvidersEnablers versus Providers

EnablersEnablers Typically upstream suppliersTypically upstream suppliers

with substantial equipmentwith substantial equipmentand software support.and software support.

Primary function isPrimary function isInfrastructure ISVInfrastructure ISV

Examples IBM, EDS, &Examples IBM, EDS, &MicrosoftMicrosoft

Customers need aCustomers need asophisticated ITsophisticated ITunderstandingunderstanding

Key descriptions of top 25

5

5

6

14

0 5 10 15

Managed

Hosting

Provider

SaaS

Application

software

vendor

Infrastructure

ISV

Enablers

Hardware

SoftwareProviders End User

Software

Services

Enablers versus ProvidersEnablers versus Providers

ProvidersProviders Typically lesser known,Typically lesser known,

smaller vendors that providesmaller vendors that providemore focused servicesmore focused services

Primary function is SoftwarePrimary function is Softwareas a service.as a service.

Examples, Examples, WebExWebEx* and* andEmployeaseEmployease

Customers need less ITCustomers need less ITunderstanding since servicesunderstanding since servicesare directed toward end user.are directed toward end user.

Enablers

Hardware

SoftwareProviders End User

Software

Services

Key descriptions of top 25

3

4

5

21

0 10 20 30

Business Service supplier

Application Outsourcer

Application Software

Vendor

Saas

Example of a successful providerExample of a successful providerSteady growth of Web conferencingSteady growth of Web conferencing

Web Conferencing RevenueFrom Web Conferencing Market Trends by Jay Gitomer

0

500

1000

1500

2000

2003 2004 2005 2006 2007

Pa

st,

pre

se

nt,

&

futu

re

($

10

00

s)

WebEx accounts for 2/3s

Application Service ProvidersApplication Service Providers

Software as a serviceSoftware as a service Enablers Enablers vsvs providers providers Stand alone versus multi-serviceStand alone versus multi-service AdvantagesAdvantages Disadvantages and risksDisadvantages and risks Proposal to utilize Proposal to utilize ASPsASPs to minimize to minimize

costscosts

ASP Business TrendsASP Business TrendsFAIT Study by Daniel FAIT Study by Daniel FigueiredoFigueiredo, ASP market trends., ASP market trends.

Stand alone ASPStand alone ASP Original ASP modelOriginal ASP model Loss billionsLoss billions

Lack of broadbandLack of broadband Flooded marketFlooded market

Evidence returningEvidence returning Availability broadbandAvailability broadband Shrinking IT budgetsShrinking IT budgets Fewer, more sophisticatedFewer, more sophisticated

organizations.organizations.

Multi-ServiceMulti-Service Survived fall outSurvived fall out Diversification worksDiversification works Other servicesOther services

Understood customerUnderstood customerservice was keyservice was key

Consulting aConsulting acomplimentary optioncomplimentary option

Application Service ProvidersApplication Service Providers

Software as a serviceSoftware as a service Enablers Enablers vsvs providers providers Stand alone versus multi-serviceStand alone versus multi-service AdvantagesAdvantages Disadvantages and risksDisadvantages and risks Proposal to utilize Proposal to utilize ASPsASPs to minimize to minimize

costscosts

Advantages with ASPsAdvantages with ASPs

Customer has more control. Service contractCustomer has more control. Service contractmeans no more paying to means no more paying to ““upgrade*upgrade*”” or debug. or debug.

Customization of services can reduceCustomization of services can reducecomplexity and lower costs.complexity and lower costs.

Expected 15%-20% savings a year if portion ofExpected 15%-20% savings a year if portion ofIT services are outsourced.IT services are outsourced.

WebExWebEx can minimize travel costs. can minimize travel costs. ASPs like ASPs like Employease can enhance internal can enhance internal

services for soft savings (less turnover,services for soft savings (less turnover,minimized legal risks, etc.)minimized legal risks, etc.)

Application Service ProvidersApplication Service Providers

Software as a serviceSoftware as a service Enablers Enablers vsvs providers providers Stand alone versus multi-serviceStand alone versus multi-service AdvantagesAdvantages Disadvantages and risksDisadvantages and risks Proposal to utilize Proposal to utilize ASPsASPs to minimize to minimize

costscosts

Disadvantages and RisksDisadvantages and Risks

Hidden costs such as contracts & trainingHidden costs such as contracts & training Provider system may crash unexpectedlyProvider system may crash unexpectedly International instability for off shore ASPInternational instability for off shore ASP BuyerBuyer’’s remorse if provider-customers remorse if provider-customer

relationship degrades over timerelationship degrades over time Flat rate billing ignores marketing flexibilityFlat rate billing ignores marketing flexibility

Application Service ProvidersApplication Service Providers

Software as a serviceSoftware as a service Enablers Enablers vsvs providers providers Stand alone versus multi-serviceStand alone versus multi-service AdvantagesAdvantages Disadvantages and risksDisadvantages and risks Proposal to utilize Proposal to utilize ASPsASPs to minimize to minimize

costscosts

Proposal to utilize Proposal to utilize ASPsASPs to toreduce costsreduce costs

Reduce IT costs by outsourcing a portionReduce IT costs by outsourcing a portionservices.services.

Utilize Utilize WebexWebex to reduce overall costs and to reduce overall costs andenhance training.enhance training.

Provide more Human resources services byProvide more Human resources services byutilizing utilizing EmployeaseEmployease..

Establish standardize procedures.Establish standardize procedures.

I. Reduce IT costs by outsourcing aI. Reduce IT costs by outsourcing aportion of servicesportion of services

Construct a team of internal IT support, EDSConstruct a team of internal IT support, EDSor IBM reps, and associates that rely on IT.or IBM reps, and associates that rely on IT.

This provider-customer team should analyzeThis provider-customer team should analyzealternatives in outsourcing.alternatives in outsourcing.

Calculate EVA on alternatives.Calculate EVA on alternatives.

Decide on the best EVA-service option.Decide on the best EVA-service option.

II Utilize II Utilize WebExWebEx to reduce overall to reduce overallcost and enhance trainingcost and enhance training

Ten associates travel to have a day meeting at aTen associates travel to have a day meeting at acommon location. common location. $9000$9000..

Video conferencing - Video conferencing - $5000$5000 (not counting equipments costs)(not counting equipments costs)

WebExWebEx cost cost $1500$1500 $0.33/minute per person $0.33/minute per person

$100,000 annualize savings.$100,000 annualize savings.

III Provide more Human resourcesIII Provide more Human resourcesservices by utilizing services by utilizing EmployeaseEmployease..

Construct a team made of internal IT,Construct a team made of internal IT,EmployeaseEmployease, and human resource, and human resourceassociates.associates.

Seek methods to delegate benefits admin,Seek methods to delegate benefits admin,employee self-service (example - IRA), andemployee self-service (example - IRA), andrecruitment.recruitment.

Consider enhancing services by providingConsider enhancing services by providinginvoice reconciliations, enrollment support,invoice reconciliations, enrollment support,and fulfillment services.and fulfillment services.

IVIV Establish standardize procedures.Establish standardize procedures.(Samples from report)(Samples from report)

Contracts should have back up plan if serviceContracts should have back up plan if servicedegrade or stop.degrade or stop. Includes alternate suppliers.Includes alternate suppliers. Make sure restrictions can be lifted if shut down occurs.Make sure restrictions can be lifted if shut down occurs.

Take precautions to protect integrity of data.Take precautions to protect integrity of data. Provider should NOT be linked to your competitors.Provider should NOT be linked to your competitors. ““Liability is not out sourced.Liability is not out sourced.””

Inform and involve associates at each stage.Inform and involve associates at each stage. Consider incentives to retain key associates duringConsider incentives to retain key associates during

transitions.transitions. Reassess skills and provide additional training for associatesReassess skills and provide additional training for associates

to fully utilize the newly outsourced environment.to fully utilize the newly outsourced environment.

Questions?Questions?

Thank you.Thank you.