Application Service Providers (ASPs) - Guide to Cloud Computing for Business and Technology Managers - page 232

11.2 Fundamentals of ASP
International Data Corp. (IDC) describes an ASP scenario as “an end user
accesses an application resident on a server, just as he or she would on a
LAN or in the enterprise data center. However, the server resides at the ASP's
third-party data center and is reached via a dedicated line or the Internet (or
extranet). The applications can range from low-end, productivity programs
(e.g., word processing) to high-end ERP modules. The service is provided
on a subscription basis and can bundle a full range of hosted application
services.”
Compare the process of leasing a car. Not much upfront money is
required, consumers get something they might not be able to buy outright,
they pay for it monthly, and, at the end of the lease, they decide what to
do with the car. By just licensing a few seats from an ASP, organizations
get a full-functioning application that might be something more powerful
and sophisticated than they could buy outright. They have access to the
application without having to pay for hardware, software, or installation.
Organizations can realize financial cost savings, reduce capital investments,
and lower IT management requirements. Such an option also allows organi-
zations to focus on their core businesses and react quickly to changes in the
marketplace—both opportunities and threats.
In traditional outsourcing arrangements, the entire business process is
handed off to the outsourcing company—operations, the legacy application
itself, the infrastructure it was built on, and some of the internal IT staff to
support it. Today, every level of the IT infrastructure (network, data, messag-
ing and system management) can be selectively outsourced. With the ASP
model, the software and its required infrastructure (including support) are
provided by the application service provider, but the actual business process
operations are still handled by the organization. If an insurance company
outsources its claims processing, the outsourcer receives the claims and pro-
cesses the claims on its hardware using its software and its staff. With the ASP
model, the insurance company's staff receives the claims and processes the
claims on the ASP's hardware using the ASP's software and infrastructure.
An ASP service is not the time-sharing of the 1960s or the outsourcing of
the 1980s. The ASP model is much more than the rental of a slice of time.
The model allows an organization to decide the location of the computing
capability based on economic and financial grounds. It provides an option
for sharing information and conducting transactions. The ASP model uses
client-server architecture and relies on secure, cost-effective data communi-
cations. The IT staff does not need to have expertise in the application or the
infrastructure that is being handled by the ASP. ASPs can be used to fill gaps
in an application portfolio. So the focus is on saving time as well as cost, and
time and cost are two major variables of any IT project.