Are ASPs in the Future of HR?
Yet another revolutionary information technology trend is promising to change the way firms run their operations, including human resources. This time, it’s the trend toward software service providers.
There are two schools of thought about this trend. Some analysts say that business software, such as enterprise resource planning, will remain basically the same but that the industry called application outsourcing will grow. In this industry, service bureaus run programs on their own premises for other businesses for a fee. A second and more radical school of thought predicts that an entirely new kind of software will take the lead: programs written to run over the Internet. This is already sparking a proliferation of firms, generally called application service providers (ASPs) or business service providers, which rent access to software that’s based on their servers.
These service providers usually focus on high-end applications, and they can fill many human resource needs directly over the Internet. Software and hardware giants, such as Microsoft and IBM, have jumped onto this bandwagon, as have a multitude of new firms. With continuing shortages of high-tech specialists and with the high cost of employing them, companies are more and more willing to hand off complex and yet routine tasks to such service providers, according to Forrester Research. Forrester predicts the ASP market will jump from $150 million in 1999 to $6 billion by 2001. A study by International Data Corp., a market research firm, predicts spending on HR outsourcing will grow to $10.2 billion by 2003 and Internet-based companies will capture 16% of the market by then, up from 10% in 1998.
Although small and medium-sized companies without a substantial investment in infrastructure have more reason to move rapidly to service providers, some big companies are buying into the trend, too. In December 1999, Tyco International, a $22-billion manufacturing firm that operates in 80 countries, hired HostLogic, an ASP operating in six countries, to manage enterprise resource planning applications by SAP AG for its subsidiaries. Its size and the fact that Tyco is outsourcing applications critical to its mission made this something of a landmark deal, analysts said.
Europe may be ahead of the U.S. in the use of service providers, according to an interview in Computerworld with Charles B. Wang, president and CEO of Computer Associates International. The telecom companies in Japan, Korea, China, Taiwan and Hong Kong have all made the decision to catch up in business applications on the Internet, adds Wang, and, while they are currently behind, they may be able to leapfrog over other countries by building a better infrastructure from the start.
How does an ASP work for HR? It may allow, for example, employers to have an interface where they can call up all the data on their employees and all the employees’ benefits. Employees can go into the same system at work or at home and see just their own information. Using their interface, insurance carriers have access to the data they use and can see employees’ life-event changes and reconcile billing. Third-party administrators, who administer benefits for large clients, can get information about their particular client base.
Some advocates also argue ASPs can free up HR professionals to do more productive work. Amerisure Insurance, for instance, hired ASP firm Employease to do its data entry work, freeing 14 HR professionals to develop a variable-pay plan for the company, according to the Wall Street Journal. That task otherwise would have gone to a consultant. Employease costs Amerisure $40,000 annually for online benefits administration, while previously the company paid $75,000 for a telephone-based system.
Of course, many large firms and the IT professionals working in them may remain skeptical of ASPs for a while. After all, software application service levels, which are hard enough to support within a corporate firewall, could become unpredictable if essential applications are piped outside the organization. Moreover, Computerworld has reported that at most start-up ASPs things like security, staffing, reliability and an understanding of the business processes behind the applications are sometimes sketchy. But proponents predict that time will make companies more comfortable with such Internet applications. One interested observer calls it “the ATM effect.” When ATMs were new, people were reluctant to use them, he says, but now customers gladly use ATMs at all times of the day and night.
====================================================
For an article about why large companies may use ASPs, see
http://www.computerworld.com/home/print.nsf/all/000403D03E
For an article on the different types of service providers, see
http://www.computerworld.com/home/print.nsf/all/000203E692
For an article about how ASPs may challenge the consultancy industry, see http://forum.aspnews.com/general/keynotes/BP0002.htm.
For an article about the benefits of keeping IT talent in-house, see http://www.computerworld.com/home/print.nsf/all/000501DA26
There are two schools of thought about this trend. Some analysts say that business software, such as enterprise resource planning, will remain basically the same but that the industry called application outsourcing will grow. In this industry, service bureaus run programs on their own premises for other businesses for a fee. A second and more radical school of thought predicts that an entirely new kind of software will take the lead: programs written to run over the Internet. This is already sparking a proliferation of firms, generally called application service providers (ASPs) or business service providers, which rent access to software that’s based on their servers.
These service providers usually focus on high-end applications, and they can fill many human resource needs directly over the Internet. Software and hardware giants, such as Microsoft and IBM, have jumped onto this bandwagon, as have a multitude of new firms. With continuing shortages of high-tech specialists and with the high cost of employing them, companies are more and more willing to hand off complex and yet routine tasks to such service providers, according to Forrester Research. Forrester predicts the ASP market will jump from $150 million in 1999 to $6 billion by 2001. A study by International Data Corp., a market research firm, predicts spending on HR outsourcing will grow to $10.2 billion by 2003 and Internet-based companies will capture 16% of the market by then, up from 10% in 1998.
Although small and medium-sized companies without a substantial investment in infrastructure have more reason to move rapidly to service providers, some big companies are buying into the trend, too. In December 1999, Tyco International, a $22-billion manufacturing firm that operates in 80 countries, hired HostLogic, an ASP operating in six countries, to manage enterprise resource planning applications by SAP AG for its subsidiaries. Its size and the fact that Tyco is outsourcing applications critical to its mission made this something of a landmark deal, analysts said.
Europe may be ahead of the U.S. in the use of service providers, according to an interview in Computerworld with Charles B. Wang, president and CEO of Computer Associates International. The telecom companies in Japan, Korea, China, Taiwan and Hong Kong have all made the decision to catch up in business applications on the Internet, adds Wang, and, while they are currently behind, they may be able to leapfrog over other countries by building a better infrastructure from the start.
How does an ASP work for HR? It may allow, for example, employers to have an interface where they can call up all the data on their employees and all the employees’ benefits. Employees can go into the same system at work or at home and see just their own information. Using their interface, insurance carriers have access to the data they use and can see employees’ life-event changes and reconcile billing. Third-party administrators, who administer benefits for large clients, can get information about their particular client base.
Some advocates also argue ASPs can free up HR professionals to do more productive work. Amerisure Insurance, for instance, hired ASP firm Employease to do its data entry work, freeing 14 HR professionals to develop a variable-pay plan for the company, according to the Wall Street Journal. That task otherwise would have gone to a consultant. Employease costs Amerisure $40,000 annually for online benefits administration, while previously the company paid $75,000 for a telephone-based system.
Of course, many large firms and the IT professionals working in them may remain skeptical of ASPs for a while. After all, software application service levels, which are hard enough to support within a corporate firewall, could become unpredictable if essential applications are piped outside the organization. Moreover, Computerworld has reported that at most start-up ASPs things like security, staffing, reliability and an understanding of the business processes behind the applications are sometimes sketchy. But proponents predict that time will make companies more comfortable with such Internet applications. One interested observer calls it “the ATM effect.” When ATMs were new, people were reluctant to use them, he says, but now customers gladly use ATMs at all times of the day and night.
====================================================
For an article about why large companies may use ASPs, see
http://www.computerworld.com/home/print.nsf/all/000403D03E
For an article on the different types of service providers, see
http://www.computerworld.com/home/print.nsf/all/000203E692
For an article about how ASPs may challenge the consultancy industry, see http://forum.aspnews.com/general/keynotes/BP0002.htm.
For an article about the benefits of keeping IT talent in-house, see http://www.computerworld.com/home/print.nsf/all/000501DA26