Outsourcing - How to Buy An ASP



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How to Buy An ASP
By Peter Bendor-Samuel, CEO, Everest Group

confused woman If one outsourcing model meshes well with ecommerce, it's the ASP model. Ecommerce companies race to bring their products to market; ASPs are fleet of foot and can ramp up quickly. Hypergrowth companies that have 40 employees today and 400 next year love the pay-as-you-grow model. And web-based businesses feel at home turning to the Internet for their applications.

Now, even large companies are looking hard at the ASP solution. They like the idea of not having to keep up with technology or attracting or retaining hard-to-find employees. Outsourcing to an ASP is becoming cost effective for them, too.

So, how does a company buy an ASP?

Here at the Outsourcing Center, we know that is a big question in the marketplace. As the dominant Internet outsourcing community, we have over 200,000 visitors a month. That is one of the most common questions we get these days.

While due diligence is crucial in selecting any outsourcing supplier, it is absolutely vital when selecting an ASP. Caveat emptor, ASP buyers. Today, ASPs are multiplying geometrically. A shake out will happen; not every ASP on the landscape currently will be operating next year. BPO buyers don't have to worry about supplier mortality if they outsource to long time industry leaders like Arthur Andersen, PricewaterhouseCoopers or EDS. There's no such certainty in the Wild West world of the ASP.

Haste is one of the drivers in selecting an ASP. Rushing the due diligence can be a big mistake in today's environment. What if your ASP doesn't have a disaster recovery system in place and is not equipped to do proper backups?

Many ASPs are new companies who have not yet developed a system of accountability to their buyers. The biggest reason is they have been in a rush to get the business up and running. Having clear metrics or set service level agreements (SLA) have not been a high priority. Many do not even have them! However, every successful outsourcing relationship must include the ability to accurately describe the process, determine the process boundaries and measure the results. Without these, there's no guarantee buyers will get what they want or even what they pay for.

Many of these new ASP suppliers do not have the discipline to establish this needed accountability for their buyers. They are even telling the buyers metrics and SLAs are not necessary. In my experience, I have yet to observe an outsourcing relationship where they weren't necessary. I am here to tell you they are very necessary. Buyers, make sure you have process boundaries, metrics and SLAs in your ASP contracts.

The plethora of ASPs flooding the market has prompted another question? How do you weed out the weak ones and select the best choice for the process you want to outsource? Our answer is to consult the Outsourcing Center's supplier database, the largest on the Internet. We constantly update our database, so you can have the largest selection of possible providers.

And how do you winnow this list down to the two or three providers who are the best fit for you? One option we have created is the Outsourcing Exchange Center to help buyers through the selection and contractual process. The Exchange helps to winnow out the ASPs who can deliver.

In addition, the Exchange has detailed process descriptions for every outsourced process and the appropriate metrics and SLAs. Buyers can communicate these important components to their prospective vendors to inform them this is how they want to structure their outsourcing relationships.

Using the Exchange helps ASP buyers make a sound supplier choice, compress the contract cycle time and complete the transaction at a reduced cost.

ASPs are making their mark in the outsourcing world. They provide a new and cost effective way to compete in today's connected marketplace. They are a great way to outsource if you have done your homework.

Lessons from the Outsourcing Primer:

It's caveat emptor when outsourcing to an ASP. Some of the new ASPs will have a short life span, so buyers have to select one that has staying power.
Many new ASPs don't have the maturity or discipline to offer process boundaries, metrics or SLAs. If they tell you they are not necessary, don't believe them. Insist on these always!
Even if you are in a hurry to get your product to market, don't rush your outsourcing search.

Publish Date: November 2000

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