Return of the ASP

Hoping to capitalize on the federal government's interest in outsourcing, Corio Inc. officials are pitching their application service provider (ASP) offerings to agencies and have already landed some customers.

Earlier this year, the San Carlos, Calif., company brought aboard a big name — Mark Forman, former e-government guru at the Office of Management and Budget. He joined Corio's board in January.

ASPs run high-powered applications on behalf of customers. Human resources managers, for example, can work on PeopleSoft Inc.'s popular applications, but the software is actually running at the ASP's data center, not at the customer's site.

ASP proponents say the systems reduce the cost of owning and operating information technology. Agencies don't need to buy and maintain servers or data centers when they can subscribe to an ASP. Federal agencies, observers say, are growing increasingly interested in ASPs, especially as IT budgets shrink.

The Small Business Administration is one agency at which the cost argument made sense. Susan Abraham, acting director of the Office of Financial Systems in the Office of the Chief Financial Officer, said the agency switched to Corio — from another hosted offering — last year for its internal accounting systems partly for cost reasons.

Using a nonhosted solution for the applications would have been impractical because SBA chose Oracle Corp. software for the accounting systems but does not use other Oracle products. With no in-house Oracle expertise, hosting made the most sense, she said.

"We looked at core competencies in the agency from an Oracle expertise perspective," she said. "We looked for a cost-effective way of getting all this expertise, and Corio fit."

Corio officials hope to persuade more agencies that the approach is rewarding, said John Ottman, the company's executive vice president.

"The government's always had a tendency toward outsourcing," he said. "What we're offering is a new brand of outsourcing, which is based on what we call applications on demand."

Corio provides back-office software services, using popular applications from PeopleSoft, Oracle, SAP America Inc. and Siebel Systems Inc., among others.

"What we've done is build extensive technology to automate the back office," Ottman said. Corio's iSRVCE interface connects users with various software applications they need to run.

The company has "built up a fairly nice list of government customers," including the Coast Guard, but wants to expand its reach in the federal sector, along with state and local governments, Ottman said.

The company has established a service for smaller agencies "that want to run tier-one software but are challenged either by infrastructure requirements or skill requirements," he said.

The addition of Forman to the board brings the company his understanding and insight into what the government needs, Ottman said.

Ottman said the government market is more comfortable with the ASP concept. "Four or five years ago, people would have raised an eyebrow," he said. "Today, it's become quite commonplace. The whole on-demand systems market is mainstream."

Phil Fersht, a senior analyst

of business process outsourcing

at the Yankee Group, said commercial and public-sector customers have become more confident in the ASP model's security and reliability.

"What we need to look at is, what are the next drivers," he said. "ASPs do make sense. It's just a question of what's going to drive" agencies to use them.

For government customers, the pressure to perform more efficiently is a significant motivation for IT decisions, he said.

"The big driver for government is meeting their performance targets," he said. "There's a major issue around security

and around head count reduction. Government agencies don't like letting people go. They do like things that deliver better services to the public and to the businesses they serve."

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Applications in demand

Customers of application service providers are most likely to buy these applications as services:

Industry-specific software.

Customer relationship management.

Human resources.

Accounting.

Groupware.

E-mail/instant messaging.

Source: IDC

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