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Why should I host?
Outsourcing Business Applications is a critical discussion point
for every company – from Executives to Directors of Information
Technology. It has truly become an integral business strategy
- past, present, and future. Core has built a solid base of satisfied
customers by consistently delivering value and better performance
at a cost often less than company’s can do themselves.
Application Service Providers
(ASPs) and Outsourcing Market
According to IDC, the worldwide spending for outsourcing services
should have reached $142 billion by 2003. The application outsourcing
(AO) market will grow to $16.2 billion in 2004 from $7.0 billion
in 1998. The following presents some of the drivers, barriers,
and market trends that will impact the viability of the ASP model:
DRIVERS
• Shortage of skilled workers: Qualified human resource
is in high demand while the market is not providing enough talented
IT workers. A crucial factor for a business to remain competitive
in the market - recruiting (and retaining) competent technical
expertise.
• Focus on core business competencies: Outsourcing to a
third party allows organizations to focus on developing core business
competencies.
• Access to advanced technology: By outsourcing to third
party vendors companies have access to the latest advanced technology
without additional personnel, cost or obsolescence concerns.
BARRIERS
• Security: Once of the main challenges to the ASP model
is the uncertainty regarding the security of sensitive information.
Organizations demand more stringent security standards. Of course,
companies also realize that keeping systems in-house is not necessarily
more secure - it depends on the investment in security hardware
and software.
• Quality of service & support: Some of the performance
concerns include issues of availability, scalability, and reliability.
Service Level Agreements (SLAs) will definitely be a top consideration
for companies considering ASPs.
• Fear of losing control: Control is a primary concern of
all businesses. Fearing that once they give the outsourced function
out to an outside vendor, they will lose control of the process.
MARKET TRENDS
• Minimize total cost of ownership (TCO): The ASP model
can typically translates into a 30%-50% annual savings. Most small
to midsize businesses can’t afford enterprise systems via
traditional channel. But now small and midsize companies will
have access to the power of enterprise systems through a new breed
of Application Service Providers (ASPs).
• Small companies spending more: Spending is rising from
the small companies (100-999 employees) on outsourcing services
market. Adjustments are made by major outsourcers to include the
small and middle markets into their target customer base.
• Accelerated application deployment: META group research
indicates the average duration for an ERP deployment continues
to be over 12-month period. However, implementation periods are
measured in days and weeks in the ASP model compared to traditional
channels.
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