The Cole Papers, ASP, July 2000

July 2000

Application Service Providers (ASP) aren't snakes in the grass

SAN FRANCISCO -- How large a bite does technology take from your operating budget? Apart from the equipment capitalization, what does it cost to install, integrate, manage, house, upgrade -- all the tending and tweaking that keeps your information technology department occupied?

If you could spread the cost among some fellow newspapers, would a sliver of savings be fair trade for less control and customization? For the entire publishing process? That's what suppliers are putting on the table, as a whispery acronym crept through NEXPO 2000, held here June 17-21, faster than a false rumor.

Application Service Provider, or ASP, is the e-term for the "D.P. for hire" concept. Call it time share, service bureau or outsource, the notion is that an outsider's well-equipped techno-cafeteria can whip through your data processing and slim your IT (information technology) overhead.

Tried-and-true for web site hosting, archiving and content resales, circulation and accounting functions, ASP deals look like manna from heaven for some production system suppliers.

They first catch the early adopter's imagination by offering remote-control web content management and e-commerce solutions. Then it's a small mind hop to newsrooms laying out tomorrow's pages on servers in another state -- which somebody else manages. A vision of thrills or chills?

Have I got a deal for you ...
In the two weeks before NEXPO opened, ASP went from nary a mention to de rigueur in press releases. Companies willing to host remote production included front-end graybeards and new media freshlings: Atex, Banta, FileFlow, Fizzylabs, Geac, Harris, Microsoft, Net-Linx, Open Market, Revere Group, SaxoTech and USA.NET.

One debuting supplier moved from "we're a-thinking" on Opening Day to "can do" by Morning No. Three. That suggests shoppers liked the idea a lot.

Here's a fictionalized example of the pitch:

The Mid-Size Journal really wants to ramp up its web-publishing efforts, especially for connecting its advertisers to e-commerce. So far Mid-Size's IT department has knitted together new media software, but since the 'Net hasn't paid off, the publisher wants to shed a few techie jobs.

Besides, job turnover is perennial, as young techies build enough resume hours to flee to geekheaven-dot-com.

Then at NEXPO 2000 the Journal's IT director wanders into Eur-o-Tex's booth. Its e-commerce and web management package is dazzling. The purchase price is blinding.

"No problem," says Eur-o-Tex's marketing director, "just lease the technology. You connect via T1 lines to our server hotel in Data City, Va., hook your content creators through a web browser and PCs, and we'll take care of everything except selling to your advertisers."

The cost is a one-time setup charge less than a geek's annual pay, followed by monthly licensing fees that are less than your CEO's BMW lease.

You'll be live in weeks, and anyone on staff who can play games on-line can grasp the software.

If Eur-o-Tex lives up to its ASP promises for a few years, there's a front-end/pagination package that looks like a fitting replacement for the Journal's Legacy Integrators' system.

What's to lose?

Lean and mean kills R&D
Suppliers hope you'll find nothing to lose, because they foresee lean months ahead in this industry's glut-or-starve sales cycle. The Y2K upgrades are over, and companies need piles of R&D dollars to ride out the surges in database, programming and communications changes.

With fewer big-dollar markets to harvest, suppliers need access to the fertile fields of small and medium markets. To gain an invitation to these long overlooked 35,000- to 100,000-daily newspapers, ASPs offer to rent feature-rich technology once affordable only by metro and multi-masthead operations. Think of Wolfgang Puck going fast-food franchise.

In the sales pitch is a promise that the provider's life-sustaining gain is the customer's welcome loss:

Expense flood control. Instead of big budget blobs, ASP offers both provider and renter a steady, predictable cash flow. A boon to small newspapers that dread debt, the monthly fee trickles become a river for the suppliers, who must prove to creditors and investors that newspaper publishing is a nice, stable industry.

Economies of scale and skill. By herding IT budgets away from individual newspapers and into ASP coffers, suppliers offer greater bang for the buck, not just for better servers but also for programming and administration talent.

Servers are obsolete as soon as you sign the purchase order. Now suppliers will assume the burden of keeping well equipped. No more limping along with five- to 10-year-old gear just because it still runs.

Housing computers becomes an avoidable cost, too. Give up on-site servers, controller racks and staff, and IT can budget for less Halon, UPS capacity and climate control.

But it's brainware rather than hardware that presents the most appealing efficiencies. For example, there's the cost to train software technicians who set up new users or modify directory and flow controls. Once a system is installed, the on-site people with those skills get rusty or retired. Exercised every day at an ASP, those skills stay sharp for both speedy setups and modifications.

A second economy is cutting in-house integration time. With the proliferation of open solutions, newspapers have been forced into being their own system analysts and integrators.

ASPs are willing to do the job once and for all. They write, locate and combine a suite of compatible applications, then refine and recombine as programs and companies emerge and disappear. The newspaper gets to buy the flour instead of driving the combine.

To have and to hold. Closely related are the economics of keeping programming and development talent at home. Competing for good minds is a losing battle, as an industry addicted to underpaying competes with an industry accustomed to brain bidding wars. Suppliers are among those bidders, and in sales droughts, when newspapers await either better economic times or better products, suppliers can't keep talented staff around kicking at dust. Taking over this hiring headache, for a price, lets the ASP hire talent a customer can't afford and keep the talent busy through thick and thin.

Invisible upgrades. With software centralized on the ASP server farm, any bug fixes or improvements are installed in one location to benefit many users. In fact, users may not even notice, as patches are shipped overnight.

Updates and how-to files are delivered to the user's thin clients via the 'Net: "Hi, we're delivering a better system. Click OK to accept."

Beyond the benefits of better-equipped users, centralized upgrades help the ASP keep customers satisfied at low cost. One supplier noted that many sites postpone upgrades indefinitely or handle them so badly that it's cheaper to fly in a field engineer than try to talk local staff through by telephone.

It's a case of redeploying site-license or software maintenance money into the ASP budget, saving the site's cost for distributing upgrades.

Try now, try often. Sliding in incremental new features is a way to manage change. Rather than swallowing big work shifts with a major upgrade, users can settle into new processes gradually, as bits are completed. Or they can toy with new functions, and if response is bad, the ASP can ditch them. That lowers development overhead.

Sow that ye may reap. ASPs say delivery to new customers is much faster, because the technology is at the ready. This means faster sales cycles, earlier live dates and faster return to the customer, especially if the product generates revenue.

First, count on the death of the dreaded sales process. Suppliers say the time-eating cycle -- requests for proposal, trade-show visits, on-site demonstrations and endless committee presentations -- is as costly for the newspaper as for them. With an ASP demo just a secure web login away, this ritual can be kinder to buyer and seller.

Then there's lag between deal and live date. The ASP is live, so setup goes faster.

That is especially valuable when the functions build advertising revenue. Especially for e-commerce solutions, the newspaper's hunger for an income trickles at low overhead.

For the well-endowed site or group that can afford an in-house system, ASP offers a second revenue angle: Become an ASP for siblings in a group or independents in a region.

So all a newspaper has to lose are headaches and overhead.

Some IT directors beg to differ. They say ASP is a siren's song, with the risks of dashing hard-won resources against the sharp rocks of supplier greed.

Or as a supplier veteran of two decades quipped, "It's pay me now or pay me later, but you will pay me."

Losing control
IT managers at smaller newspapers were open-minded at NEXPO. If the price is right for reliable performance, there's a willing ear to hear about features.

Skepticism ran high among metro executives. Not only would they be releasing a major means of production, they would loosen their grip on resources to meet in-house expectations. Call it a control issue, or even a trust issue, as long memories recall that some eager-to-be ASPs were weak on support after sales. Among their objections:

Uncontrolled costs. "Oh my God, out of control costs," is how one metro manager reacted to the ASP concept.

After weighing economies of scale, suppliers just might succumb to the temptation to keep more than they pass along.

And hopping between competitors isn't a realistic customer countermeasure. Once settled into an ASP relationship, it will be hard to comparison shop.

That goes for enforcing performance standards as well. A good start won't mean a sustained level at an ASP, and the choice to weather a bad spell or pull up stakes will be difficult for customers. Smaller, more nimble newspapers will be better positioned to shop for price and service.

Timely attention. Because they are vulnerable to time in their work cycles, newspaper staffs see themselves as special creatures. If a technology can build efficiency in each work task or avoid process interruptions, its success is measured in timesavings.

By time-sharing servers and staff, IT directors doubt if a slice of the ASP's attention will satisfy internal customers.

It can start with the traditional demands, like system customization to squeeze minutes out of processes. Factors like union contracts and press schedules put a premium on different functions in, say, a pagination system. Or customization provides niceties that ease transitions, like whether a department calls file deletion "spike," "kill" or "trash," and what becomes of the file.

IT staff also are devoted to downtime response, and if failure occurs with an ASP, their biggest role will be taking heat.

Distributed applications need tweaking to run at their best, and once staff has been shrunk with the promise of lower operating demands, who keeps an eye on system loads?

Vulnerability to failure. And who gets yelled at when something goes wrong? IT directors build backups to cut the possibility. With ASP, thinking outside the box means moving risk outside the box.

As one metro systems editor put it, "I wouldn't want a call in the middle of closing the paper telling me that someone had cut a fiber-optic cable down the block."

No, a call that your own guy cut a computer-room cable is much better, rejoined a colleague.

So it may be. Cities may have just one fiber bundle on the block, while newspapers design switches between network zones.

Security and data control. Perhaps because of holdover culture, perhaps because of well-publicized breaches, newspaper managers fret about keeping prying fingers out of their databases.

Baiting the hook
ASP is hardly a new in concept in the newspaper business. Starting with the debut of Vu/Text in 1982, MediaStream Inc., of Philadelphia, Pa., has offered monthly storage plans and revenue sharing programs for newspapers that couldn't afford the cost or headaches of in-house archiving and content resales.

What is new are the venues for the share-a-server business.

Granddaddy purveyor Atex Media Solutions Inc., of Bedford, Mass., offers its Enterprise advertising system and Prestige editorial and Web publishing system, plus a promised array of third-party applications. Its first ASP customer is the San Francisco-based Industry Standard, a weekly magazine covering Internet businesses.

All 35 of Rockville, Md.-based SaxoTech Inc.'s customers in Scandinavia, are ASP'ed to its Publicus Web content and e-commerce package, and its first U.S. customer is The Blade, of Toledo, Ohio. A basic setup fee gets them started, then hosting is priced in three tiers based on circulation size and the amount of content, readers and traffic.

Cincinnati-based Gannett Media Technologies International has offered its Celebro advertising products as ASP for more than a year. Licensing fees are based on both newspaper size and potential market size, such as the number of auto dealers in the newspaper's region. An ongoing fee is charged for work on setting up new clients.

In other industries, ASPs work best for batch or transactional services, and even smaller newspapers may be nervous about overtures from time-critical, mission-critical arenas.

The most tempting ASPs may be business office, circulation and classified applications, where early production cycles reduce risk. Advanced Technical Solutions, of Wilmington, Mass., is sizing up the potential of the Circ2000 system, after the success of its developer, Central Newspapers Inc., in hosting smaller enterprises in the Phoenix, Ariz., base area. (ATS says that despite Central's recent sale to Gannett Co. Inc., it will continue to sell and service Circ2000.)

Expected in September, JazShak is the Web-oriented ASP appetizer from Harris Publishing Systems of Melbourne, Fla. Inherent in JazShak is a version of WebJaz, one tool set in Harris's new JazBox of editorial, Web publishing and archiving systems. JazShak also features a two-tier pricing structure, this time with a usage twist: Customers will pay a token monthly fee, then will be charged for the amount that particular features are used. New components, such as auctions, coupon delivery and sports tickers, will be launched over the next 12 to 24 months -- about the time technology costs may drop enough to support production features.

So in the length of time it took your pagination committee to pick a supplier (if it hadn't starved in the meantime), contenders for your next system bet technology will rewrite their business equation. Bandwidth needed for higher-powered processing will be cheaper and farther flung. Servers will be faster and stronger. Distributed computing will work out redundancy and reliability kinks.

By then, they hope your publisher has acquired a taste for ASP.

-- Marion J. Love, mjl@colepapers.net

Advanced Technical Solutions, (978) 657-6500, e-mail: info@atsusa.com;
Atex Media Solutions Inc., (781) 275-2323, e-mail: info@atex.com;
Gannett Media Technologies International, (513) 665-3777, e-mail: info@gmti.gannett.com;
Harris Publishing Systems Corp., (407) 242-5330, e-mail: hpscmktg@harris.com;
SAXoTECH Inc., (301) 294-0805, e-mail: info@saxotech.com.

Application Service Providers (ASP) aren't snakes in the grass

From THE COLE PAPERS, July 2000, Copyright © 2000, All Rights Reserved.