Hosted Services Replace 'Resource' With 'Outsource'

Try it before you buy it. That age-old consumer caveat applies just as well to buying an enterprise application as it does to driving off the lot in a used car. In fact, given the potentially exorbitant cost of the former, there's an even greater imperative for buyers to know what they're getting. For midmarket companies in particular, trying out an application can save the regrettable expense of purchasing a soon-to-become-underused system.

In order to know how an application will affect the enterprise, it makes sense for companies to put some hard miles on an application with their own business processes behind the wheel. While software vendors aren't likely to provide loaners for lengthy periods of time, companies can still testdrive a system by relying on the lease or rental car version of application delivery - hosted services. By outsourcing applications to a hosted services provider, companies can evaluate products and determine which best fill their needs. "The ASP (application services provider) model offers tremendous flexibility for end users," says Bob Fitzgerald, VP, sales and marketing for hosted services provider Radcliffe Systems, Inc. (Markham, Ontario). "For example, if a company is considering a new module for its ERP system, it can outsource the module for six months or a year and try it out." According to Chris Patteson, director of product development for ASP dotLogix (Memphis, TN), "Having site-tested the product for a lengthy time period gives the company bargaining power when it does decide to make a purchase."

Make Your Web Presence Known
Of course, hosted services providers don't necessarily want or even expect their customers to eventually bring the applications in-house. For midmarket IT managers, permanent outsourcing of some applications and services can be a cost-effective way of managing an IT infrastructure with limited resources. "Midmarket companies don't always have the capacity to support all of their internal systems," Patteson says. "After outsourcing for a while, they might discover that we can save them from making expensive investments in tier one solutions that are more than they really need." For companies of any size, outsourcing can bring flexibility when it comes time to upgrade. "Legacy systems can be draining in terms of support," says Fitzgerald. "By contrast, modular applications, particularly Windows-based applications designed for Web delivery, make it much easier for customers to have the most current features."

Because they are Web-based, hosted applications are particularly useful for companies needing to support an e-business channel. Again, internal IT resources are a key factor. "Many companies don't want to house and manage their own Web sites. We can route their customers through our hosting service to their on-site servers," Fitzgerald explains. Patteson notes that outsourcing online services can give companies the opportunity to take a staged approach to establishing a Web presence. "We start by helping their CSRs (customer service representatives) spend less time fielding calls to handle orders. We put the company's catalog online and tie it in to an order management system so customers can log in to place and track an order. When the company is ready to take the next step, we bring in batch integration and real-time inventory updating."

Demand Full-Service Hosting
As companies evaluate service offerings from hosted providers, Patteson urges them to think about how well the applications they outsource will mesh with their business processes and needs. If the service provider doesn't offer much in the way of customization, potential customers may be left with the same integration costs and headaches they were trying to avoid by outsourcing. "Remember, an application alone is still an island. By solving one piece, you don't get much value," Patteson warns. "If you're outsourcing, then you should receive a set of managed business services - ways to connect things like credit card processing and financial transactions and warehousing." Patteson also advises companies to be wary of service providers who lock their customers' data or make it difficult to migrate data to a different product or environment if and when the outsourcing agreement ends. "We have customers run our applications with us for a year while they get their staff and database infrastructure in place for bringing the applications in-house. We'll even help them to import our package into their environment."

Fitzgerald agrees that companies should consider whether or not the provider offers service options. "A company can have us house the hardware and applications in our data center and monitor the network for them. We'll even provide the front-end devices. Or, the company can house the system at its own site, and we'll service it as part of the contract," Fitzgerald explains. "If clients decide to move the system in-house, we can use our network to back up their servers to our facility and offer them complete disaster recovery capabilities."

Ask For Wireless Delivery
As hosted services evolve, the choice of services will also have to include delivery to wireless handheld computers. Says Fitzgerald, "AT&T and the Bell companies will soon be going live with GPRS (general packet radio services), allowing TCP/IP (an open computer communications language) over a cellular network. So, now you can have browser-based applications out in the field. To save routing costs, you can switch back and forth between cellular and satellite services."

According to Patteson, wireless broadband services will also help to address data transmission issues that impede hosted services in some geographic areas. "We generally need to run some kind of frame relay connection although we get by in some areas with a VPN (virtual private network)," Patteson says. "Wireless broadband will help; however, for midmarket companies, it may be too expensive initially."

And, midmarket companies, in particular, are conscious of expense. According to Patteson, that's okay because smaller companies can often get by with less. As a final reminder, he advises, "If you're shopping around for a services provider, pay attention to who is willing to match the level of service you need. If you're not doing global business, you might not need to pay for the extra overhead of having 24/7 support for your hosted applications."