July 24, 2000

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Growing Pains

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Even so, there are bound to be service problems. Forrester's Butt says many of the network and management service providers that ASPs partner with use performance metrics that don't reflect reality. "Companies tout 99.9% uptime but build in outage levels in hours rather than minutes per week," he says. That means the service could be down for almost one hour every week and still meet the guarantee. Some network providers such as Sprint and UUnet exclude system maintenance from uptime guarantees, according to a recent Forrester report authored by Butt. What's more, UUnet's 100% uptime guarantee requires that customers experiencing an outage report the problem within five days in order to receive a credit.

To avoid being responsible for the pitfalls within the network service provider facilities, Sopko says ASPs have also taken liberty with the term "force majeure" in many of their service contracts. Force majeure is a legal term that can excuse performance under a contract in the face of disaster, riots, or acts of nature. Sopko says to most businesspeople, force majeure means an act of God such as fire, hurricane, or tornado. But to ASP executives, force majeure may mean "anything that can't be blamed on the ASP," Sopko says, such as failures by third-party suppliers, technology changes, or delays in supporting product lines.

Still, some ASP relationships have proven their worth. Robert Mulcahey, chief operating officer for Stratum Med Inc. in Urbana, Ill., had some luck when his company decided to use PeopleSoft's ASP business. The executive was covered by his service-level agreement when he ran into implementation problems with WorldCom. Mulcahey says problems occurred when WorldCom was installing the T1 lines to his facility. "They were taking a lot longer then we expected," says Mulcahey, who made several calls to WorldCom himself to remedy the situation. "PeopleSoft got involved just when they were about to violate the SLA," he says. Mulcahey says installing the lines took about 30 days longer then he had expected. Because there was a completion date in his SLA contract, PeopleSoft would have had to provide service credits had the installation taken any longer then it did.

Mulcahey, whose apps are set to go live Sept. 1, says PeopleSoft must pay a penalty if he has one interruption in service within a 30-day period, and that fee increases with the number of interruptions. He couldn't provide the actual fees because of a nondisclosure clause in his contract.

Other ASPs, say Sopko and network service providers, manage to get out of their SLAs if the client requires customization. The Oracle customer says he didn't have any customization issues because his contract stated the software couldn't be customized. But to him it was somewhat of a plus. "Now whenever something goes wrong, Oracle can't blame the customization because there is none," says the CIO.

Application customization, such as changing the way a screen looks or altering the business process within an application, has been an area of controversy within the ASP industry since the beginning. ASPs want to stay away from software modification because they say it's unnecessary, raises costs, and causes problems down the road with upgrades and enhancements.

ASPs say that individual customization makes it difficult and costly for them to deliver applications using a one-to-many model. By delivering one version of an application to many customers, ASPs lower their overhead. But if customers require customized views of their applications, this model won't work. To combat the problem, many ASPs offer tailored implementations for specific vertical markets. Corio, for example, offers separate versions of the same software for the dot-com, high-tech, and manufacturing sectors, while Center 7 offers software tailored for E-commerce.

One of the most challenging aspects of customization is personalization, which provides tailored page views, text, and screens. Those types of changes can be lost with an upgrade and must be reimplemented, adding time and cost. Customers typically ask for a customized look and feel to their screen layouts strictly for personal preference, not for strategic reasons, says Jonathan Lee, chief strategy officer for Corio.

But customers disagree. Gant Redmond, director of operations for privately held Authentica Inc., an online security company in Waltham, Mass., that recently received $18 million in funding, says he'd like personalized page views from Corio for his PeopleSoft application. Employees must scroll through several PeopleSoft financial screen layouts before arriving at the page they need to enter information. He'd like Corio to eliminate the unnecessary page views. "PeopleSoft is meant for a large corporation with many different people handling different functions. But in a small corporation such as ours, one person wears many hats, so navigating the program is more difficult because there's a lot more to know," Redmond says. "Being able to personalize page views would help Corio deal with smaller companies."

Corio says iView will address such demands. If it works as designed, customers won't have to scroll through multiple pages. Rather, they'll be able to view small portions of the data they use on a regular basis. "This is a way for us to protect the mission-critical data, while at the same time allowing users to view some portions of data they may need," says Kirk Krappe, senior VP of marketing for Corio. The downside is that iView is offered only over the Web. Customers wishing to use the full features and functions of the application over a more robust connection won't be able to access the simplified view that iView will provide.

One area still lacking in the ASP relationship is training. The amount of training provided to customers varies among ASPs. They typically include the cost of limited training as part of the implementation fees; additional training costs more. Redmond says that his company received only one day of training on the complicated PeopleSoft application and could have used a lot more.

Many ASPs offer training credits to customers, but those credits usually don't cover all of the training users need. An Oracle class on its general ledger applications, for example, costs six training credits, or $2,400 per student. Oracle refused to disclose how many credits it typically offers, stating that it's different for each application. Jan Anger, director of finance for $55 million LDMI Telecommunications in Hamtramck, Mich., says she sent several users to a two-week class for the financial apps she leases from Oracle Business OnLine. Anger didn't disclose how many credits she received from Oracle but says she had three support packages to choose from and that her company shelled out additional dollars for their training.

Engage.com's Britton is accessing Onyx Software Corp. customer-relationship management applications from Breakaway Solutions Inc. over a VPN. The executive says he received one day of internal process changes training and two days of application training from Breakaway, which was included in his service costs. "Many people treat training as a one-off hit, and until you experience the application for a period of time, you won't know exactly what you need out of the training," Britton says. "You're still going to require additional training, and you're going to have to pay for that."

These and other issues will take time to work themselves out in the ASP model. By now, though, it's obvious that IT managers who expect IT issues to disappear because they hired an ASP are setting themselves up for disappointment. Says Sopko, "Many customers hold unrealistic expectations for their ASPs, and that will hurt them in the end."

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Illustration by David McLimans
Photo of Mulcahey by Greg Whitaker
Photo of Redmond by Matthew McKee

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