ASPs: The final stage of outsourcing

Though slow to catch on, application service providers deserve a look from HR

Human resource professionals advise business leaders on a wide range of people issues. But when it comes to discussing technology, nobody comes knocking on the HR department’s door for advice. Being excluded from such discussions means HR can’t always do what needs to be done to ensure technologies are understood and embraced.

Because of this, HR needs to reshape its image, becoming technology-savvy and taking steps to be included in decisions and processes when it matters most.

While technology is constantly changing, there is a silent revolution on the horizon. It concerns a family of software applications that could have a significant impact on the business landscape in years to come.

ASPS: “Is this any of my business?”

Between the recessions of the early 1980s and the early 1990s, management gurus were abuzz with a selection of battle cries, all claiming to help businesses concentrate on what they did best and how to do it even better. Many careers, books and conferences focused on solutions, including business process re-engineering (BPR), total quality management (TQM), the flexible organization, competency building, outsourcing, downsizing and rightsizing.

Technology played a significant role in all of these solutions. Complex and expensive enterprise resource planning (ERP) systems often emerged as the predominant method to ensure new management approaches and priorities were implemented.

With the current frailty in the economy, it comes as no surprise that business leaders are again seeking to answer core questions, the most critical being, “What business are we in?” But unlike ERP systems, whose return-on-investment still remains elusive for most firms, businesses can now turn to a source that yields more immediate and quantifiable benefits: application service providers (ASP).

What is an ASP? ASPs are firms that design and execute software solutions that are hosted on the Internet rather than in-house. Think of ASPs as the final stage of outsourcing. Once condemned as “inhumane,” because of the reduction in staffing, outsourcing is now regarded as a normal part of business: Contracting external suppliers to execute those jobs that, while important, are not central to the business’ core operations. Similarly, ASPs provide technologies that accomplish required, but not business-critical, tasks that are typically conducted in-house.

For example, human resources professionals often host conferences that bring together employees, colleagues and clients. But who has the time or resources to co-ordinate all the activities involved in registering attendees? An option may be to use an ASP that tracks all the forms and privacy-sensitive attendee and payment information. The result can be significant cost savings in administration, precise attendance counts and immediately deposited fees. This can be accomplished without having to purchase software.

But why consider an ASP over other solutions such as ERP systems or keeping technologies in-house? The financial argument is easy. According to a recent study by Internet researcher IDC, an ASP implementation will yield significant quantitative and qualitative benefits including an average return-on-investment of more than 400 per cent over five years. Furthermore, recent surveys of Fortune 500 companies found almost 80 per cent of firms that implemented ERP systems were unsure whether they had, or will ever, achieve a return.

ASPs are an opportunity for HR. ASPs are exceptional at building technologies but not as skilled at developing business relationships. That places prospective HR clients in the driver seat when negotiating prices, timetables and terms since ASPs are anxious to get their foot in the door.

ASPs haven’t been widely introduced into other functional areas such as operations, finance, sales and marketing. That allows HR professionals to be regarded as technology leaders and innovators within firms.

When to use an ASP. Businesses are always walking a tightrope, balancing on one side the need to control and predict critical aspects of business and, on the other side, shedding themselves of activities that either slow down or inhibit sustainability or growth. Using an ASP will allow organizations to re-examine exactly how business is done. And, while the investment is a fraction of complex ERP systems, nonetheless some very specific and proven guidelines around timing and features need to be followed before choosing an ASP.

Is an ASP for you?

Consider using an ASP to address a function or series of activities if you answer “yes” to two or more of the following five questions.

1. Risk management. By continuing to conduct certain activities yourself, are you exposing your firm, employees and clients to an unacceptable level of risk? For example, if you gather client information for marketing or client service, can your systems protect the integrity of that information?

2. Competency. Do you engage in a series of activities for which you don’t have the requisite expertise in-house?

3. Opportunity. Are you missing out on opportunities to conduct different activities that could build sustainability or growth — but, you don’t have the time or resources to recruit and staff positions to accomplish these activities?

4. Expense. Have you concluded that your return on technology is not what you need to be competitive or meet financial obligations?

5. Culture readiness. Is your business culture supportive and willing to divest itself of activities that are traditionally conducted in-house?

The criteria for implementation

Choose an ASP to replace a function or series of activities only if the Internet-based software application meets the following three criteria:

•provides a positive experience for the intended user;

•provides reliable and appropriate levels of client service; and

•provides management with access to meaningful and flexible reports.

By choosing an ASP wisely, organizations will be able to focus on the core activities that will help them succeed. HR professionals can demonstrate technological knowledge in terms business leaders can relate to — saving dollars and enhancing efficiency. HR professionals can use this as an opportunity to be included in key technology discussions.

Andrew Z. Brown is president of Write on the Money, a Toronto-based business writing and communications firm that shapes employee behaviours to help human resources professionals attract and retain talent. For more information, visit www.writeonthemoney.com.

Functions of an ASP

An ASP provides access to software housed on a server for a monthly or yearly fee. Under that basic model, there are five types of services ASPs typically offer:

Office IT infrastructure. ASPs can manage all computer-related functions. ASP companies will supply all hardware configured with core software packages, access to additional software on their server and round-the-clock maintenance and troubleshooting for hardware and software. They will also absorb the costs of any upgrades needed, relieving the customer of this ongoing cost. Data is backed up onto the server on a continuous basis, giving a high level of protection and data security.

Business software. ASPs provide pay-by-use access to software packages for functions such as accounting, customer relations management, human resources, project management, recruiting and training. In some instances, ASPs provide industry-specific applications.

Web site design and hosting. ASPs offer design, hosting and remote management of Web sites, especially for sites that incorporate e-commerce or e-business applications.

Web-based e-business applications. ASPs provide specific Web-based applications such as suites of e-business functions, online catalogues, shopping carts, payment facilitation, online processing, site search engines, interactive e-reps and e-marketplace hosting.

Basic Internet access. ASPs may function much like Internet service providers and offer services such as e-mail and Internet browsing as part of a package of other services.

Since the client is using the equipment of the ASP via a high-speed link, the client does not need to continuously upgrade equipment or software as that is the ASP’s responsibility. Increased sophistication in ASP development means ASPs can mount a customized application for a client in a matter of days rather than months, as was previously the case.

Source: Industry Canada

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