InformationWeek

March 6, 2000

The ASP Approach: Experience Equals New Products

t's the euphemism du jour: Refocus on your core business. But the Internet has given that truism a new twist. Just ask Extendicare Inc. and West Group Inc.

In the last few months, Extendicare, a $1.45 billion health-services provider, sold a hospital and 14 nursing homes in England for $42 million and a medical specialty equipment and home-care services company in Wisconsin for nearly $13 million, to focus on its long-term care homes in the United States and Canada. Extendicare, through its Extendicare Health Systems Inc. unit, expects to recoup some of the revenue lost from sold-off operations through an Internet business it's creating, called Atelier Systems, which the Milwaukee company labels a "virtual care provider." In IT lingo, Atelier is an application service provider, or ASP, that will lease to smaller nursing-home companies the applications Extendicare created to run its business.

West Group Inc., an Eagan, Minn., legal information publisher, is using the same E-business model to generate more revenue and create new markets for its products and services. West Group is creating an ASP to provide small law firms with productivity tools based on Microsoft Office 2000. Extendicare and West Group want to tap into the burgeoning ASP market that could top $9 billion in revenue by the end of 2003, according to market researcher Dataquest.

Such initiatives could work, says principal analyst Ben Pring, who tracks ASPs for Gartner Group. "A lot of small, professional-services companies don't have the capabilities to buy and manage those types of sophisticated applications themselves," Pring says. "If they can source them in an almost telephone-like manner, then logic suggests it will be a fairly easy sell." But Pring cautions that it's a new business model that hasn't yet been proven, adding, "The jury is still out."

Initially, Atelier Systems will host financial, general ledger, decision-support, and clinical applications that Extendicare developed for itself. Clinical applications, among other things, track daily activities of long-care home residents such as keeping records of injuries and illness as well as Medicare reimbursements. The applications run on IBM OS/400 and Microsoft Windows NT systems. Customers will access Atelier either via the Internet, dial-up, or MCI WorldCom, Extendicare's frame relay provider.

VP of IT Howard Lange wouldn't say how much Extendicare is spending to create Atelier, but it's being financed from the company's $13 million annual IT budget. Revenue from Atelier could subsidize Extendicare's IT operations within two years, he says. "The more accounts we service, the less technology will cost Extendicare," Lange says. "We'll get our own IT for free." Eventually, Extendicare foresees Atelier Systems evolving into an E-commerce marketplace, with links to group supply chains, health-care solution providers, application developers, and vendors.

West Group and its ASP venture, WestWorks, isn't taking advantage of homegrown technology, but it's capitalizing on its two decades of experience providing information online to lawyers. For WestWorks, West Group developed legal templates to work with Microsoft Office 2000 and Microsoft Exchange and Timesolv, Elite.com's time and billing software. WestWorks will let attorneys unite their workflow by simplifying a full range of tasks. The ASP's applications also will be integrated with West Group's research-library and document-assembly tools. WestWorks applications will be fully integrated; client data needs to be entered only once. When an attorney starts to work on a specific case, the time and billing application automatically starts logging billable hours. West Group will begin beta testing by midyear.

WestWorks is one of several online ventures West Group plans to debut. In the past year, it created Lawoffice.com, a legal directory and marketing service for 3,000 law firms whose home pages are hosted by West Group. The company is also developing a system to let lawyers file and retrieve legal documents with the courts over the Internet. WestFile is being pilot-tested in the Orange County, Calif., superior court system. "We know the law, we know lawyers," says West Group president Michael Wilens. "To grow the company, we look for new products and services like WestWorks to help lawyers be more productive."

Return to main story, "Seeking The Deeper Path To Success."

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