Vendors of application outsourcing services think they have the killer application - e-mail - to lure customers into handing over their business-critical applications, but it remains to be seen whether they will bite.
The arguments for outsourcing e-mail to ISPs are compelling. Lower maintenance costs, guaranteed availability, and the freeing up of IT resources to focus on issues such as Y2K and Internet commerce are at the top of the list.
For some customers, however, these ben-efits are not reason enough to relinquish control of this critical service.
Many network administrators are not ready to trust an external source with e-mail systems and fear that security may be compromised.
Although several analysts agreed that outsourcing e-mail can be valuable even for very large organisations, most conceded that the outsourcing market has still not matured.
"It makes a lot of sense for large busi- nesses, but the market isn't ready for that yet," said Jilani Zeribi, an analyst at Current Analysis.
For one ISP, the biggest challenge in winning over the large customers is that most big organisations have already made a huge financial investment in e-mail systems.
"The initial adopters are small-to-medium businesses," said Jon Crumrine, product manager of application services at US-based Intermedia. "While there are services now that can emulate server-based systems, enterprise customers want to wait until their current investments expire."
Crumrine also said that even the most sophisticated hosted messaging services do not yet offer needed groupware, calendaring, and advanced workflow functionality. Recognising this challenge, vendors are racing to deliver to the market e-mail systems targeted at ISPs that include these capabilities.
"Vendors and suppliers are coming to market with much more desirable solutions," according to Sara Radicati, president and CEO of the Radicati Group.
"They're adding more collaboration and workgroup functionality, calendaring and scheduling, and better security," Radicati said.
Cost has been the most immediate driver for companies that have chosen to outsource. However, as several vendors pointed out, the return on investment needs to be significant for people to consider handing over these valued enterprise systems.
"There is about a 20 to 30 per cent savings curve," according to Jed Kleckner, senior product manager for hosting at Netscape. This means that typical organisations will not opt to outsource their e-mail unless they believe they are getting a cost saving in that percentage range.
Officials at Netscape's erstwhile competitor Sun Microsystems agreed.
"It costs enterprises about $US200 per user per year to run on one of these messaging servers like Notes or Exchange," said Dilshad Simons, group marketing manager for mail and messaging at Sun.
"Now people are turning to these ISPs for services that run $US19.95 or are even free - and it's not just messaging, but a whole package of services."