May 2000

21 ASPs and What They Can Do For You

By Penny Lunt

• ASPs Offering Document-Related Services (PDF, 120K)
• ASPs That Offer Document-Related Services (PDF, 202K)

If you’re looking for a way to store and share documents on the Web without spending hundreds of thousands of dollars on software, hardware and IT help, an Application Service Provider (ASP) might be just the ticket.

You’ve probably read about ASPs. International Data Corp. (IDC) defines them as companies that provide “a contractual service offering to deploy, host, manage and rent access to an application from a centrally managed facility.” ASPs host your software on their server and let you and your customers use it through browsers over the Web. ASPs reduce or eliminate the upfront software and hardware costs of a new application as well as the time and labor costs of installation and integration.

Companies spent $296 million on ASP services worldwide in 1999. IDC projects that spending will increase 92%, to $7.8 billion, by 2004. The document-related portion of that market — collaborative applications (including groupware, document management and email) and personal applications (such as office suites) — accounted for one-third of ASP spending in 1999. IDC expects that portion to jump to 50% by 2004.

“Three technology trends are creating the movement toward ASPs: low-cost, high-speed connections; low-cost storage; and low-cost workgroup scanners,” says Nicholas Duncan, CEO of Critical Technologies (www.criticaltech.com), an imaging software developer, VAR and ASP.

Small and mid-size companies that lack IT resources are ideal candidates to use ASPs for managing documents. So are large companies looking for a technology shortcut in a new or non-mission-critical area.

“If you think about the function that’s most often outsourced, it’s payroll,” says Ron Arenson, vice president of marketing at CyLex (www.cylexsys.com), an ASP that specializes in image capture and document and content management. “No organization would tell you payroll is unimportant, but most companies don’t see payroll as their core competency. It’s the same way with imaging and document management.”

Logging on to your application through an ASP can yield a number of benefits:

· Little or no upfront capital investment (if there is, it’s spread out over monthly payments).

· No additional strain on an already overburdened IT staff.

· Speedier implementation. The ASP has already installed the software; they’re simply connecting you to it with password protection and perhaps customizing it (which should take weeks rather than months).

· No risk of technological obsolescence. It’s up to the ASP to furnish upgrades. It should be easier to get an ASP to customize and add new features to a program for you than to buy the software and compete with the manufacturer’s other customers for that kind of attention.

· Lower overall costs. The ASP is achieving hardware and software economies of scale that they should be able to pass on to you.

· Security, backup and maintenance. These are provided in what is probably a fortress-like data center.

Inova Fairfax Hospital has begun using document technology ASPs to its advantage. This 656-bed medical center serving greater Washington, D.C., needed a better system to code patient charts. A shortage of coders led to a backlog, and the resulting delays in billing were causing cash flow problems.

“The ASP model was attractive to us because there’s no upfront capital expense,” says Jennifer Shearer, director of health information management. “With technology changing so quickly, it’s not worth spending money on something that’s going to change in three years.”

Shearer says Inova Fairfax looked for a system that would be easy to use because many of the chart coders were not computer savvy. The hospital also wanted to avoid placing additional burdens on the IT department.

The hospital chose ASP and software vendor InterTech (www.intertech.com) for its iCopy and WebCoding applications. The hospital pays InterTech $1 to $3 per chart for the hosted software. ICopy and WebCoding store and manage scanned images of patient charts and present them via Web browsers to coders who work from their homes. Offering the work-at-home option has attracted a much-needed new labor pool.

Shearer says the new system has fostered a 15% to 20% increase in productivity for outpatient services charts. Now that billing is back on track, cash flow has improved. When the hospital needs changes made to the system, InterTech makes the changes immediately.

“Sometimes you don’t have flexibility with canned software packages,” Shearer says. “With this system, [the ASP] can make changes on the fly and the reporting capabilities are flexible.”

Shearer says she’s improving two things about this arrangement. One is that she’s upgrading all of the coders’ home computers to meet InterTech’s specifications. Substandard machines with less than 64 megs of memory initially slowed the downloading of software and images. The other change is she’s integrating the hospital’s abstracting system (part of the patient accounting system) with the hosted coding system. Lacking access to the abstracted information, coders working at home have had to fax or email entries into the system.

Another satisfied user of documents via ASP is E*Trade, the online broker/dealer based in Palo Alto, CA.

“The SEC requires us to accurately and reliably archive our customer emails so we can quickly recall them,” says Tom Bevilacqua, chief corporate development and strategic investment officer.

E*Trade’s answer has been Digital Safe from Zantaz.com (www.zantaz.com). Digital Safe archives high-volume Internet-based email, documents and transactions. Zantaz.com provides the back-end archival and backup for $2 per megabyte of storage.

“Zantaz.com archives our customer emails, and whenever regulators ask us to recall them, we access them from Digital Safe,” Bevilacqua continues. “We have been audited and we’ve passed those tests with flying colors.”

The Digital Safe also helps E*Trade respond to customer inquiries by letting CSRs refer to current and archived customer emails through their Web browsers.

Atrinity, an executive advisory firm in Fort Wayne, IN, uses a document management application hosted by Punch Networks (www.punchnetworks.com) to collaborate internally and with customers. Documents under management include expense reports, needs assessments, workflow analyses, implementation and business planning documents, marketing materials, and newsletters. More than 45 Atrinity employees and 100 customers worldwide use the system. Punch provides managed check-in and check-out, revision control and archival of documents.

“Three years ago we were emailing or mailing documents to customers or showing up on their doorstep with documents,” says Larry Jones, Atrinity’s president. “In some cases, documents were very large and hard to transport electronically. When we wrote the original specification for a central way to manage information, we estimated the system would cost $500,000 at minimum. We couldn’t find any off-the-shelf product that could handle this. We wanted an open architecture, an ODBC compliant database like Oracle or SQL, and Internet capability — and we wanted it customized.”

Atrinity was already using Punch Networks’ WebGroups for internal correspondence. “We work on documents as we travel, and we’re also virtual — nobody is in the same office together,” Jones says. “WebGroups let us synchronize our local machines with the central location. If anybody had updated documents, we could get those updates. The system would only download changes rather than whole file, which is good when you’re using modems. We felt this could be a vehicle for customer correspondence.”

WebGroups has turned out to be an efficient way to share documents with customers. Atrinity has more than 10,000 documents stored in WebGroups. Punch WebGroups are free for up to two WebGroups and 10 megs of storage; above that it’s $9.95 per month per group.

Stop, Caution and Proceed Signals

Why wouldn’t a company want to use an ASP? The automotive lease vs. buy analogy is often used to describe this software pricing model. While the monthly payments of a lease are attractive to some, others would rather pay for the car up front and potentially save money in the long term. Large organizations that have big, experienced IT staffs and abundant servers and storage hardware are more likely to be software buyers.

“There are two reasons why you’d want to buy your own software,” says John Pemble, president of Insci-statements.com. “One reason is, your transaction or document volume is very high.” In this case, buying the software and running it in-house on your own server is likely to be cheaper over the long run.

“The second reason is, you want to be in control,” he continues. “It takes a leap of faith to send your customer documents off to somebody else to deal with. I think there are companies and customers that don’t want to do that.”

Insci-statements.com plays both sides of the fence: They develop document management and electronic bill presentment software, and they also host software, having recently spun off a wholly-owned ASP subsidiary called Infinitespace.com.

A little caution is a good idea for any ASP novice. When you talk about ASP providers and the ASP industry, the words “embryonic” and “infancy” come up a lot. This is a hot new area. You can’t draw on any vast storehouse of wisdom on this subject because none exists. To provide an extensive listing of services and points of comparison, we’ve compiled the four-page chart that is available in PDF format via the links at the top of this page.

As you investigate prospective ASP partners, you should consider how they address the following basic concerns:

Security: This is a big issue for many companies. You’re trusting another company to store large volumes of important information, including customer documents. It’s a good idea to look at the ASP’s physical site (or shared facility), and make sure it’s organized and secure. Almost all the vendors we interviewed provide SSL-encrypted transactions and a data center firewall. In addition to providing the firewall itself, you’ll want the ASP to be able to monitor the firewall logs to see who is getting through. All the ASPs in our chart also provide password security so that unauthorized users can’t call up documents.

To provide an additional measure of protection, Punch Networks and InterTech can provide digital certificates to all user machines. Digital certificates authenticate PCs as they connect to the server.

Backup: For anything approaching mission-critical, you should be able to get robust backup and data mirroring at a remote site. Punch Networks, for example, mirrors data at the user’s site. Critical Technologies writes documents to RAID for a year of online storage. As documents expire, they can be moved to CD or optical platters. Tape is used for long-term tape backup.

Support: 24/7 telephone support is a useful feature. However, if your business is strictly 9:00 to 5:00, that may not be necessary. Some large installations warrant a dedicated support person at the ASP who stands ready to troubleshoot all problems.

Customization: How quickly will the ASP be able to respond to the changes to software and reporting that you need? Does it have sufficient staff to back up its assurances?

Integration: How would the ASP connect your document management service to an ERP program or a new e-commerce system? CyLex, for one, has written an open API for integrating its hosted applications to other enterprise applications.

Who’s Out There

As you’ll discover on the pages that follow, ASPs of all stripes are offering a gamut of hosted document applications — from content management to image capture to electronic bill presentment.

“Pure-play” ASP providers like AristaSoft, CyLex, DashCenter, Mi8, Punch Networks and Zantaz dedicate themselves to hosting and maintaining software. Sometimes they co-locate with third-party providers such as Level3 and EMC. (Co-location providers specialize in providing physical aspects of data facilities like data rooms, servers, storage, uninterruptible and redundant power sources, Internet access, and security.)

“Being at a facility like that has advantages,” notes Charlie Cumbaa, executive vice president of sales and marketing at InterTech. “We’ve had situations where a customer might upload four to five million documents in one night. We’re comfortable that Level3’s technology is well-proven to scale.”

Pure ASPs have the advantage of focusing their people and resources on document software hosting and maintenance. Some ASPs, like CyLex, FilesOnTheNet.com and Infinitespace.com, focus on document software. Others offer a broader palette.

Software vendors are also hopping on the ASP bandwagon. Their advantage is they own the solution and can easily make adjustments to meet ASP customer needs. Documentum (www.documentum.com) has made its 4i document and content management software available through three ASP partners: Blueline Online, Connectsite.com and CyLex. InterTech, too, is providing document management and workflow through ASPs. They’ve already customized their DocuPact software for ASP delivery to two markets: insurance (with ASPs ChoicePoint and Intellisys) and healthcare (at their own facility co-located with Level3).

Forms-processing software vendor Captiva is Web-enabling the modules of its software that best suit the ASP model, and it’s seeking hosting partners to start offering service by the second quarter. Customers will still scan their forms and perform recognition repair and forms completion in-house. Only the application servers and software will be hosted off site. Viking Software, another forms-processing software company, is developing an ASP service that will allow any organization with geographically disbursed data entry to have data entered anywhere they can connect to the Internet — while maintaining the data and controlling their data entry procedures at one central location.

Electronic bill presentment companies such as Infinitespace.com, TriSense and Venture Encoding are hosting bill presentment for companies that don’t want to handle that chore on their own. They accept, segment and archive huge volumes of IBM, Xerox and other mainframe print streams and convert them to viewable formats such as PDF. They can either post pages to a Web site or email them to customers.

“The value of not printing paper and stuffing it in an envelope is so compelling,” says Pemble of Insci-statements.com and Infinitespace.com. “If you’re a company with a small to mid-size printing operation, going to an ASP makes a lot of sense.”

Venture Encoding has a mortgage-lending customer for which it hosts year-end 1098 statements online. The customer put 600,000 statements on the linked Web site, and within the first month, 12,000 customers had logged on to look at those statements.

“By April 15, that could be 30,000 visits,” says Kenneth Hargis, president and CEO of Venture Encoding. “We feel that’s 30,000 customer service phone calls averted.”

Service bureaus are also becoming ASPs. Anacomp recently created subsidiary DocHarbor, which is providing e-document centers. Delta Airlines uses it to host its air cargo waybills. DocHarbor also provides e-confirmations and e-statements for customer service reps.

ASPs have the potential to dramatically change the way people buy and use software. Some day you may not worry at all about which software product to buy and whether you need to choose document management or e-commerce software. It will all be a seamless flow of information between you, your partners and your customers serviced by an invisible ASP. For now, the market is still in its infancy, so proceed cautiously and investigate thoroughly to make certain you’re aware of and comfortable with the risks.