InformationWeek

"We're outsourcing the connectivity work that it takes to make a straight-through processing offering work," says Rich Napoli, Princeton's senior VP of application development, who also heads the data center.

The investment software company was so serious about the ASP model that last fall it became a member of the ASP Industry Consortium to learn about the ASP model, how to structure it, price it, and meet other technology partners. Because it ran a service bureau throughout the 1970s and 1980s, before its software was available on the client-server platform, Princeton is operating its hosted application out of its own data center, Napoli says. Moreover, the company has installed automation software so a lot of the work runs automatically. Princeton also signed a disaster-recovery service agreement with IBM.

According to Napoli, most of Princeton's sales from new and existing clients come from ePam, especially from international clients that can't develop the infrastructure in terms of a LAN, hardware, and operations staff. "In the ASP model, all the responsibilities rest on our shoulders. The customer is just paying for a service," he says. Napoli says some clients are skittish about putting their data across the Internet, even though Princeton secures it. Clients who aren't comfortable using the the Internet come in through a dedicated line, he says.

Princeton is leveraging technology from Citrix Systems Inc. to deliver the full Windows functionality of ePam without having to rearchitect the product. Using a browser, customers come in through Princeton's firewall, then into Princeton's Citrix server, where ePam software runs. Citrix in turn sits on top of a Microsoft terminal server.

But the ASP model may not be for everyone, and some observers question whether the financial-software companies plunging into the ASP model are cut out for the service demands. Unlike traditional service bureaus, which process trades or send out client statements, ASPs must understand their clients' processes, and they're entrusted to choose best-of-breed partners who can deliver a certain level of service.

"There's a lot more to being an ASP than just being a service-bureau provider," says Tower Group's Tabb. "You have to maintain the application, keep the data separate, and be responsive," he says. Tabb questions whether financial-software companies have the service capabilities to support hosted clients. "Most of these guys have traditionally been client-server software developers: They develop something, and they drop it on the desk. But when you're an ASP, you've got a very tight relationship with the client," he says.

Still, the draw of offering hosted applications is strong. Proponents of the ASP model say it's more cost-effective for financial-services firms than running software internally. "The ASP model is a win-win for IT departments in that they don't have to buy the hardware, install the software, maintain it, and roll it out," says WorldStreet's Corp.'s Rod Hodgman, senior VP for marketing.

Since the only investment the customer is required to make is a browser, Hodgman says WorldStreet charges customers a subscription-based fee. Because the services are delivered remotely, "it's easier for us to provision segments of services to our customers and give them precisely what they need," he says.

WorldStreet's hosted CRM application marries real-time content to customer profiles so research analysts, traders, and brokers can scan the holdings of customer portfolios. WorldStreet has signed up various content providers such as Big Charts, First Call, Dow Jones Newswires, Market Guide, and Technimetrics. Since the company's major customers, including Deutsche Bank, ING Barings, and J.P. Morgan, are global investment banks, WorldStreet recently signed a deal to use Tibco's Rendevous middleware and Hawk monitoring tools to offer services that can scale across geographic boundaries.

While the ASP model is a tremendous benefit to business users from a cost and resource standpoint, it's also much more efficient for software vendors. WorldStreet, for example, can deploy new versions of its software, one time, in the data center without convincing individual customers to migrate and without having to maintain multiple versions on multiple operating systems. "That was an expensive nightmare. Now, no one knows or cares what platform our application runs on," Hodgman says. WorldStreet's applications are hosted at an Internet data center managed by Exodus Communications.

Despite the excitement and hype surrounding ASPs, the model has yet to be proven in financial services, especially in capital-markets firms that raise capital through equity and debt underwritings, which have displayed resistance toward outsourcing critical data. "There will be some problems," says Tower Group's Tabb. The issues, he adds, will revolve around service and control of information. "I see the ASP model as good for vertical, point-oriented solutions," such as CRM, Tabb says. "But I have a hard time seeing Merrill Lynch putting its whole equity processing on an ASP."

WorldStreet's Hodgman says the data issue comes up with its sell-side customers. "We need to walk them carefully through the benefits, and we need to get into the architecture and the security of the system and how it works," he says. Ultimately, he says, the benefits outweigh their concerns, "because the data can be securely managed--maybe more securely than in their own data centers."

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