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PIPEDREAMS: Fear of the unknown

PIPEDREAMS: Fear of the unknown

I have spent considerable time discussing with customers and potential clients the role of the ASP/IT outsourcing model. I firmly maintain that the primary function of the IT service sector is to make IT easy - we need simple technology and engagement models so IT departments can concentrate on IT, leaving the business to focus on the business processes.

In the course of these discussions, several issues have spun out of the central focus of our "keeping IT simple" philosophy. These issues caused us to re-think our ASP model and adjust it accordingly to address customer fears when implementing IT, and overcome the many issues that worry clients.

The first issue relates to the legal ramifications involved in software licensing and the fundamentals of who is responsible for what.

In 1999, an IDC report stated: "The emergence of the ASP model for software licensing will have a dramatic effect on the existing _customer-vendor relationship model and could result in disaster for those vendors who do not adjust quickly enough to the new paradigm."

The report, entitled "The ASP's Impact on the IT Industry", focused on how the ASP market would shake up existing relationships between customer and vendor. It assessed the effects the emergence of ASPs would have in five key areas: services, software, hardware, communications and channels/partnering.

Now, in 2001, the same issues are being raised and must be explained by the ASP, the channel and partners to alleviate prospects' concerns. These issues include: Who holds and manages the licences? What are the costs of keeping the software legal and are these costs built in to the outsourcing contract? Do we audit our customers as some other outsourcers do? Whose responsibility is it to update software as new versions are issued?

These frequently asked questions point out the lack, still prevalent today, of familiarity with the ASP concept (a services solution model) and of belief in the opportunities offered by ASPs. An important benefit provided by an outsourcing model is that these issues are all taken care of by the provider. An organisation does not have to worry about the legal issues associated with licensing, a huge undertaking for a large organisation that can consume large chunks of IT budget (not allocated in the first place, and thus making it a business issue, with an organisation's core activity sidetracked by IT).

The outsourcer allows a business to stick to the knitting.

A service provider owns the software licences and makes the applications available to the end user on a monthly fee basis or through a rental model. It is a provider's role to manage the allocation of licensing agreements in the most cost-effective way, eliminating the occurrence of maximum licences/minimum service to the end user.

The system also eliminates piracy, with its legal consequences and costs.

The outsourcing organisation should handle licensing to allow businesses with multiple users across varying platforms to leverage their purchasing power across all of their IT infrastructure. Savings will be significant in relation to retail prices. Resellers benefit because they no longer have problems with inventory warehousing, shipping costs or stock obsolescence.

The IDC report also says: "Vendors should tread carefully when considering which channels and partners to choose. They should select strategic partners to perform specific functions, using these as a means of building market presence, and building on this to develop ASP policies, programs and relationships."

I agree entirely. Let's work together to make this _happen. Mark Franklin is CEO of Interpath Australia


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