Information Technology Reference
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c. Rapidly changing and increasing complexity of technology
d. Obtaining business domain, functional and vertical industry
expertise
e.
Shortage skilled IT labor
f. Transfer of risk regarding application ownership by the super
users
3. Business drivers
a. Reduction in total cost of ownership (TCO) by at least 30-50%
b. Predictability of cash flows by eliminating the uncertainties of
post-implementation software-related expenditures
c. Focus on core competencies and strategic objectives
d.
Improvement in the efficiency of internal IT staff by freeing them
to focus on processes and systems to leverage core competencies
e.
Improvement in coordination efforts on a global basis
However, merely hosting and managing an application is not adequate and
needs to be augmented for the creation of proprietary and sustainable cus-
tomer relationships with value-added variations like
• Domain expertise emphasis
• Vertical industry emphasis
• Vertical exchange emphasis
• Infrastructure emphasis
• Security infrastructure emphasis
• Full-service provider emphasis
• Aggregator emphasis
11.5 ASP Benefits, Risks, and Challenges
Application Service Providers (ASPs) present a real opportunity to replace
the in-house IT department. Smaller companies also need the full func-
tionality of high-end applications such as ERP, SCM, or CRM that cannot
be afforded by them. ASPs meet the needs of MME companies that cannot
afford the substantial upfront investments in establishing the infrastruc-
ture, knowledgeable and experienced staff, ongoing administration and
monitoring services, better backup and recovery methods, and so forth.
The top reasons that are cited by companies for renting applications are
guaranteed performance levels, high availability, and responsive service
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