Outsourcing the ASP Way

Some say the ASP model is akin to the days of time sharing, in which multiple organizations use the power of a central mainframe. Many agencies are comfortable with this concept. As the ASP industry grows and matures, more and more agencies are investigating the new look of this old idea. "This is basically application hosting," says Nathan Ridnouer, director of the ASP program at the Information Technology Association of America. "We've seen the emergence of hundreds and hundreds of ASPs since 1998."

A number of agencies have already signed on to the concept, including the Federal Aviation Administration, the Federal Railroad Administration and the Minerals Management Service. And while each agency is using its ASP for different applications, all were attracted for similar reasons.

The ASP Case

"People in the federal marketplace are looking at ASPs pretty closely," says Todd Weller, an Internet infrastructure analyst at Legg Mason Wood Walker Inc., a Baltimore, Md., financial services company. "This kind of solution is right for the government."

Weller says that the ASP model is similar to the kind of mainframe outsourcing that companies such as Computer Sciences Corp., Electronic Data Systems Corp. and IBM Corp. have been doing for years. "It's outsourcing in the Internet and Web world," Weller says. "Yet what's different is the technology. In the mainframe world you had to connect over private lines."

Now, agencies can set up high-speed connections via the Internet. They can still rely on dedicated lines, and some do, but the communications revolution and the rise of the Internet have changed the access possibilities. And as a result of the Internet's application distribution capability, Weller says the cost of working with an ASP is less of a barrier than in the days of mainframe time sharing.

One of the key drivers for any kind of organization considering an ASP is the IT skills shortage. "The talent that you have within an organization in the federal government is a limited resource," says George Molaski, the chief information officer at the Transportation Department. "And the more I have those limited resources working on back office functions like e-mail and accounting, the less time they have to be working on functions that are specific to the agency's mission. We need to free these people up." At the Federal Railroad Administration, 400 inspectors working from their homes all over the country are getting their e-mail service from an ASP. "It is very cost effective," Molaski says. The agency is paying USinternetworking Inc., an Annapolis, Md. ASP, a flat fee per user, or seat, for the service. The users access their e-mail over the Internet, freeing up technicians at the agency to focus on more mission-oriented systems.

And even though ASPs offer many of the benefits of simply outsourcing information technology operations, there are barriers to the acceptance of the new approach. The hesitancy is the same it always is when it comes to outsourcing, Weller says: Agencies may not want to give up power and control. Agencies also hesitate when envisioning their data flowing over the Internet. ASPs, however, claim that they use a host of security systems at both ends of the link.

"Can an ASP be as reliable as one could be internally?" Ridnouer asks. "The answer is yes." Nevertheless, experts say, agencies should investigate the security implications and should inquire about possible performance degradation when using the Internet.

An ASP by any Other Color

ASPs have sprung up as a result of the increasing viability and reliability of the Internet as a means for distributing software services. The market is as confusing as it is turbulent. It is also young, and many companies have marketed themselves as ASPs over the past two years.

But in fact, few such firms offer full-service outsourcing options. Rather, many are simply software companies providing their wares via the Internet. Other players in the ASP market include Internet service providers, systems integrators, traditional information technology outsourcing companies, data warehousers and finally what are known as "pure-play ASPs."

Pure-play ASPs are getting the most attention from federal agencies. The pure-play ASP with the fastest growing federal roster is U.S. Internetworking (USi), which partners with software companies such as Siebel Systems Inc., PeopleSoft USA Inc. and Microsoft Corp. to offer a full line of software options. USi hosts data internally at its own data center.

"USi turned the ASP model on its head," Weller says. "They charge a fixed price per seat. They also make ERP implementation a lot less complex because their services are less customized."

USi has two styles of operation. In the first, the company leases preconfigured applications to customers. In the second, USi hosts custom-configured software for customers at its data center.

Corio Inc., another pure-play ASP, offers many of the same tools as USi. Corio says that while it has no government customers, some agencies have expressed interest in its services. Corio does not own its own data center, preferring to team with what it terms "best of breed" partners.

This underscores the fact that no ASP is an island-other technologies and companies come into play. Internet service providers, for instance, are providing ASPs with network bandwidth. Independent software vendors are providing their software to the pure-play ASPs while some have themselves become ASPs. Then there are the data warehousers, like Exodus Communications Inc., who own bunker-like data centers designed to keep servers, data and applications up, running and accessible. Corio has teamed with Exodus to provide storage, space, protection and daily management of its servers. "ASPs need to have resources like a traditional staffing or outsourcing company," Ridnouer says. "ASPs are advertised as being able to help agencies when it comes to software implementation and management. But they are also able to help agencies with their workforce concerns. They do this by taking over maintenance, upgrades, security and everything else." And because traditional IT services and outsourcing companies excel at these jobs, Ridnouer says they could also end up playing in the ASP market.

The ASP Advantage

USi's inroads at Transportation and Interior reflect a willingness on the part of the government to consider ASPs as viable technology solutions. This is also reflected in the decision by Accenture, formerly Andersen Consulting, to include USi as a service partner in a number of proposals to government agencies.

The Interior Department's Minerals Management Service has contracted with Andersen Consulting to reengineer its Royalties Management Program. Andersen proposed a PeopleSoft implementation hosted by USi for the new system, called the Minerals Revenue Management Program.

MMS is responsible for collecting and distributing royalties from oil, gas and minerals taken from offshore locations and federal lands. The new program supports the reengineering of the finance, compliance and asset management functions, says Michael Del-Colle, chief of the Procurement Support Services Division at the MMS. "We're migrating from a custom environment to a commercial off-the-shelf environment," he says.

MMS' 250 internal users will be able to view data in real time. They will connect to USi via a private line. An additional 5,000 users scattered across states, localities and Indian reservations also need access to the system. Del-Colle envisions giving these users access via the Internet. However, MMS is sensitive to security and as a result has not finalized its plans. The new program is scheduled to go live in September, Del-Colle says. He stresses that MMS is not duplicating the royalty system that already exists, but is instead reengineering processes to take advantage of the off-the-shelf PeopleSoft product. Del-Colle says the leaders of the project have decided not to change the source code of the application.

The Federal Aviation Administration is also using USi to serve a PeopleSoft application. "We're trying to track costs and the agency's performance in general," says Tim Lawler, acting director of the FAA's Office of Cost and Performance Management. "It will help us do project costing, so it's more than a traditional financial system."

The system will run behind the scenes and produce management reports on what it costs the FAA to provide certain air traffic services. For example, the FAA will try to use the system to determine how much it costs 21 centers to provide en route services-managing planes in the air before they are handed off to local airports for control. The system will also report how much it costs four centers to provide oceanic services.

The FAA has never had such cost information before. Agency leaders say the new system will allow the FAA to benchmark itself against air traffic control organizations in other countries.

The FAA is leasing the software and associated services from USi, Lawler says. FAA will be connected to USi via a direct line rather than communicating via the Internet. And unlike the MMS, the agency does not need real-time reporting of financial data. What it is getting, says Lawler, are views of information that the FAA has never before had. The system can calculate and delineate direct and indirect costs as well as general and accounting data. Eventually, Lawler says, the FAA will offer a real-time view on its Intranet.

The FAA's deputy chief financial officer, John Hennigan, is comfortable with the ASP model. "We do a lot of contracting out," he says. "And this is really little different than standard contracting out."