InformationWeek

FTD.com Inc. didn't set out to hire multiple service providers to help with its Web site relaunch later this month, but the online florist ended up doing just that. Organic Inc. is redesigning the site, IBM Global Services handles application engineering and systems integration, and Intira Corp. will host the site. FTD.com chose the trio not because it was the least expensive combination, but because the three worked well together.

"Cost is always relevant to E-business services decisions," says Fred Johnson, CIO of FTD.com, in Downers Grove, Ill. "But the ability to outsource and get things moving quickly was essential, and waiting to hire an internal staff was neither cost-effective nor time-effective."

Though established companies are eager to outsource, they have not embraced pure-play application service providers. Only 6% of surveyed companies use such ASPs, which may have to be content with serving the Web startup market.

Case in point: Bass Hotels and Resorts Inc. in Atlanta, owner of the Holiday Inn, Crowne Plaza, and other hospitality chains. Bass has tapped plenty of outside E-business expertise: independent contractors for Java server application and servlet development, a local boutique company for Web-site design and another for placement on search-engine services. But using an ASP didn't make sense.

"We had the hosting infrastructure, the 24-by-7 availability, the uninterruptible power supply, and the data-recovery service," says Kas Naderi, former senior director of emerging technologies. "ASP services are priced as if you don't have those things in place already. We were able to do it in-house for a fraction of the price."

Naderi left Bass last month to become CIO of startup MunicipalTrade.com, an E-marketplace for bond trading. There, he has outsourced hosting to an ASP.

Not that companies are giving up on the ASP model. In fact, large hardware vendors are trying to make it easier for software companies to offer ASP services.

Kian Saneii, senior VP of worldwide marketing at software vendor IPNet, relies on Hewlett-Packard for infrastructure services and support. The services from HP allowed IPNet to become an ASP immediately. This allows IPNet clients that prefer to rent applications to do so, rather than buy them, Saneii says.

HP provides the redundant arrays of independent disks and all the data-center and network infrastructure that IPNet needs, he says. That includes HP delivering the needed support and bandwidth to accommodate the peaks of application use from IPNet clients. IPNet simply gives HP its sales projections. "HP provides the juice for the utility," Saneii says.

Had IPNet built its own infrastructure to become an ASP, it would have cost about $2.4 million in technology, plus additional costs to maintain the infrastructure. In addition to saving money, it saved time; IPNet would have needed at least three months to build the infrastructure. "The services from HP allowed us to become an ASP overnight," Saneii says. "We've got applications on tap."

For the foreseeable future, the unrelenting demand for E-business technology and development skills such as Java development and XML integration will keep service providers in high demand. But the outlook for high-level, strategic E-business consulting is less certain.