Subscribe    |    Sponsors    |    About Us   |   Contact Us                

ASP Home
Journal
Back Issues

Table of Contents

Insights
Moving in Both Directions

Case Studies
Heinz Makes Its New Provider Play Catch Up

Supplier Voice
Customizing the IT Process

Special Feature
Courting Law Students

EAttorney Raises The Recruitment Bar

Thanks Much For The Speedy Solution

High iQ

Analyst Voice
The Blurring Line Between ASPs and BPOs

Legal Voice
Clear Contracts Craft A Successful ASP Relationship

The fast moving world of the ASP has developed two distinct type of providers. Each type meshes with the needs of its customers to make the outsourcing relationship that results the best fit for both parties.

The horizontal service provider developed first. These vendors specialize in one function or application and offer their specialized services to customers from all industries. Their services are identical to all their customers. Horizontal providers have focused on Enterprise Resource Planning (ERP) functions like finance and accounting or human resources (HR), as well as email and customer relationship management (CRM).

This issue includes a story about HRSoft, which supports succession management. Another good example of a horizontal ASP is LeapSource a finance and accounting firm.

Recently, a new type of ASP has appeared on the outsourcing scene. Instead of taking a narrow focus on the function, these ASPs have tunnel vision on a specific industry. But their service offerings are broad, covering everything from time sheets to movie tickets.

A good example in this issue is eAttorney.com, which not only helps attorneys organize their case loads and recruit law students, but also gives them a portal for leisure activities, too. This ASP offers its customers all the IT requirements they need to complete their specialized jobs.

Both horizontal and vertical ASPs look for small and medium sized firms as their customer base. Companies in a hyper growth mode also gravitate to this type of outsourcing. Most large firms, to date, prefer the more traditional forms of outsourcing.

Vertical ASPs Understand Industry Regulations

Each type of ASP is tailor made for its specific clients. They are separate, but equal in outsourcing stature. Horizontal ASPs have honed their expertise in a process. Vertical providers have a deep understanding of an industry. It's their job to stay on top of the regulatory and tax quirks of an industry, like oil and gas or real estate, for example. They know their industries inside out. They are so specialized, no one else could really benefit from their offerings.

Start up companies often select a vertical ASP provider because they need to outsource an integrated group of applications almost overnight. High growth companies favor vertical ASPs, too.  Their exponential growth causes them to outgrow all their systems all at once. Growth comes with its own sophisticated set of outsourcing requirements.

Here at the Outsourcing Center, we faced just such an outsourcing decision. In addition to this Journal, the Outsourcing Center has a burgeoning outsourcing consulting practice with consultants working all across America, and in Canada, New Zealand and Australia. And we have our Outsourcing Exchange Center, our business-to-business (B2B) outsourcing portal which allows companies to complete the outsourcing selection and contract process online. We have grown too large and too far flung to keep track of our consultant's time and expenses internally. And we certainly didn't want to build the technology ourselves.

We have decided to outsource to Portera. Portera is another vertical vendor, offering a full set of services to the consulting, advertising and public relations industries. These include time keeping, invoicing, messaging and collaborative work areas. Portera has the ability to operate worldwide, which was a major requirement for us. By choosing to outsource to a vertical provider, we gain access to world class systems across the board instead of just acquiring point solutions.

Cost of Switching Providers Is Now More Manageable

Today's vertical ASPs are close kin to the old style of outsourcing popular in the 1970's. But the ASP format allows these vendors the ability to offer their services at a fraction of those historical costs. In addition, the extremely high and therefore punitive switching costs of the former era have been much reduced with the ASP model. Today ASP buyers can switch suppliers if the cultures of the two companies don't mesh well or the supplier doesn't deliver as promised.

As the Internet continues to transform outsourcing, additional new species of ASP may develop. But I predict horizontal and vertical ASPs are here to stay. Their buyers need them.

Lessons from the Outsourcing Primer:

• A horizontal ASP focuses on one process and offers that process to companies in many industries.
• A vertical ASP specializes in one industry and attempts to offer all necessary applications to firms in that one industry.
• High growth companies often select vertical ASPs because they outgrow all their systems all at once.
• Both types of ASP are the perfect solution for their specific buyers.

Publish Date: October 2000

Copyright © 2000 - Everest Partners, L.P.

[Previous Story] [Next Story]

ADS