IT rentals

• By R.W. McManus, PE
• Oct 01, 2000

Prior to the personal computer (PC) revolution, many software applications ran on mainframes and supercomputers. In those days, users could rent computer time to run applications and avoid significant capital expenses in computer hardware.

The proliferation of PCs and advances in processing and storage capabilities migrated many applications to the desktop. Now the market is coming full circle, users are able to rent PC-based applications from Application Service Providers (ASP) via the Internet. As in the past, application rental enables the user to avoid large, up-front expenses in computer hardware. However, today's scenario provides many new and significant benefits -- ones so compelling that the ASP model could usurp a significant portion of application software sales over the next three to five years and revolutionize business practices including environmental, health, and safety (EH&S) procedures.

The good news

The ASP model is a simple concept offering advantages too good to refuse. The model shifts hardware and software acquisition and maintenance burdens -- both financial and operational -- from the user to the ASP, lowering total cost of ownership (TCO) for the customer. For enterprise applications, the ASP approach could accelerate the management approval process for the customer since the internal resources needed for implementation will be greatly reduced and will no longer require a substantial capital investment, but rather a monthly subscription payment. This ability to expedite implementation at significantly reduced costs enables small and mid-sized businesses to access applications previously available only to large, well-funded companies. Because the ASP costing-model is based on usage (either number of transactions or number of users), it also makes application usage a varied and controlled cost.

The lower total cost of ownership of business applications will be a clear motivation for many new ASP users.

The ASP approach guarantees users access to the latest version of the application from any Internet connection in the world. ASP customers benefit from increased reliability and customer support that allows them to progress with less dependence on scarce, internal information technology (IT) resources. Perhaps most compelling to those businesses that have suffered through extended, painstaking system implementations is that it brings solutions to the user's desktop quickly and painlessly.

Development of the ASP market

The ASP market is in the early stages of development and is growing rapidly. Demand has been driven substantially by large companies seeking to avoid the costs, time and difficulties associated with large-scale software implementations as well as start-up companies that are well-funded but so driven by time-to-market requirements, they must rely on ASPs and outsourcing to help their companies grow. Business applications that are already being delivered via ASPs include those related to front office management (e.g., electronic commerce, purchasing, email/messaging management and customer relationship management) as well as EH&S (e.g. air dispersion modeling, environmental data management). Enterprise Resource Planning applications have experienced slower ASP adoption rates due to complex client/server architectures that are difficult to translate into an ASP delivery and implementation.

Although the ASP manages the customer relationship, there are an infinite number of possible configurations and partnership arrangements involving telecommunications companies, information service providers (ISPs), systems integrators, value added resellers, hardware providers, application providers and consultants. With the do-it-yourself model, the ASP delivers new or existing software applications, uses established hardware and telecommunications vendors, provides implementation services through its own professional services organization and application hosting through its own internal data center. A much more robust solution, with the best-of-breed model, the ASP utilizes partnerships for either the implementation or data center/hosting functions. The latter model exploits readily available data space and enables the ASP to focus on its core competencies.

Fees can be based on the number of transactions, the number of subscribers or by time.

ASPs also differ in terms of the markets they serve and the architecture of the products they provide. A horizontally-focused ASP delivers a full suite of software applications that generally meet the needs of many companies such as PeopleSoft and SAP who provide human resource, financial and customer resource management products. A vertically-focused ASP provides software targeted to a specific market industry segment such as the insurance or oil and gas industries. Providers of existing software can capitalize on brand recognition, but face challenges in optimizing the application for ASP delivery, providing the scalability to meet varying customer demands and selling a service rather than a product. Alternatively, new software with Web-based architecture will likely perform more effectively in the ASP environment but must be promoted more extensively.

The pricing challenge

The lower TCO of business applications will be a clear motivation for many new ASP users. However, ASPs must establish a pricing structure that meets the needs of many types of customers without becoming a billing catastrophe. Fees can be based on the number of transactions, the number of subscribers or by time. There are often implementation fees although they are a fraction of those associated with traditional enterprise-wide applications.

ASP products for EH&S

A great deal of activity is underway in the EH&S market to convert traditional desktop and client server applications into rentable ASP applications. Many traditional desktop applications will undergo an almost complete conversion into Web-exclusive applications. This requires different architecture and development tools such as XML and Java, as well as understanding and creating a product that leverages the strengths of the Internet and adjusts for its weaknesses.

ASP approach to air dispersion modeling

One desktop product undergoing the conversion is BREEZE( air dispersion modeling software from T3, a Trinity Consultants company. Air dispersion modeling software is used to estimate the downwind impact of industrial air emission sources. Although the code for the product's Graphical User Interface has been completely re-written, the user experiences a familiar look and feel, facilitating the migration for existing users. The BREEZE ASP solution also provides the customer with instant real time access to worldwide meteorological and terrain data files, eliminating the delay that often occurred in the past when customers had to wait several days to obtain data required for a project. Another advantage to the ASP approach is that newer, more complex models require more computing horsepower (i.e. - models such as AERMOD and CALPUFF), can benefit from powerful host servers. This allows results to be generated more quickly (sometimes hours instead of days) and frees users' computer resources for other tasks.

Many traditional client/server Environmental Management Information Systems (EMIS) applications will undergo a two-step process on the road to a pure Internet ASP application. Because of the product's complexity, the first step for many vendors will be to offer an application in a rentable form that can be accessed from the ASP's server with the assistance of application server software such as the Citrix MetaFrame product. With this approach, location independence is not available because a thin Citrix client must be loaded on every user's computer. Cost savings will not be as substantial due to the additional cost of the Citrix software and the additional Citrix server required on the ASP side. However, customers can realize many of the benefits of a pure Internet ASP application, which is a good first step in the migration. Companies such as PeopleSoft took this approach with their product, offering rentable applications for several years before they converted to a 100 percent Web-based product.

A Look to the future

According to Forrester Research, ASP revenues amounted to $933 million in 1999 compared to $74 billion in the traditional software application market. ASP market growth expectation by 2003 varies from $2 to $20 billion. Although the market is primarily comprised of business-to-business products/services, companies are beginning to address the consumer software market as well. Not all applications are well suited for the ASP model, but in the near future, users will rely heavily on many Internet-delivered applications.

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This article appeared in Environmental Protection, Volume 11, Number 10, October 2000, Page 42.

This article originally appeared in the 10/01/2000 issue of Environmental Protection.