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Setting the Stage for ASPs

Service provisioning, while offering a potential boon to corporate efficiency and profitability in many ways, is less about business than about technology. This sample chapter from Essential Guide to Application Service Providers is intended as an introduction to the concept of service provisioning for those who are not already steeped in technology matters.
This chapter is from the book

In this chapter...

  • Information Technology as a Service
  • Service Provisioning
  • The Storage Layer
  • The Server Layer
  • The Network Layer
  • The Application Layer
  • The Management Layer
  • Conclusion

If you are in business today, chances are good you have heard about the business potential of the Internet and the World Wide Web. E-business is all the rage. An inexact term, e-business refers to virtually any application of the technologies developed for the Internet and the Web to meet business needs.

As you might suspect, e-business covers a lot of territory. It includes "informational" Web sites that are being fielded on an almost daily basis by companies ranging from the Fortune 500 to local mom-and-pop knickknack stores. These sites are intended to provide current company information and, in some cases, to establish brand-name recognition among the growing population of people worldwide who "surf the Net." In effect, informational Web sites are the 21st Century equivalent of the Burma Shave sign.

E-business also includes e-commerce. E-commerce refers to the selling of goods and services across the Web. Online bookseller Amazon.com is an archetype of an e-commerce site, as are Bluefly.com and the host of other online catalog shopping venues offering everything from assemble-it-yourself furniture to pasta machines to sporting goods. For those with an Internet account, a Web browser, and a credit card, the World Wide Web is the world's biggest department store!

In addition to the sale of consumer goods, e-commerce also includes online banking, online stock trading, intermediation services (price comparison programs that tell consumers the lowest available price for a given product or service), electronic versions of print publications, and any other venture that earns money—in the form of sales revenues or advertising commissions—to its operators. Consumers worldwide spend billions of dollars annually at e-commerce sites. Getting a piece of this action is the primary incentive of the "dotcoms"—a jargon term for companies, many of which failed miserably in their efforts to use the Web for commercial purposes. Dotcom itself is derived from a system of domain names used to classify Web sites by their purpose. Domain Registration Services that control such matters use the designation http://www.companyname.com to identify organizational Web sites with an e-commerce bent.

E-business also encompasses Business-to-Business (B2B) arrangements. These are Web-enabled connections between the business processes of two or more companies. In many cases, B2B arrangements are established between business partners (e.g., a company and its key suppliers) and are intended to replace paper-based transactions (paper-based invoices, purchase orders, etc.) with electronic ones. Simplistically, each company uses the public Internet (or a private network) as a vehicle to provide its partner with controlled access to its internal business applications. The potential cost savings from such arrangements and increased productivity derived from effective B2B relationships are enormous. This proposition continues to drive revenues from the sale of B2B-enabling products and services toward the multibillion dollar mark over the next couple of years, according to industry analysts.

B2B is one example of how business is harnessing the technology of the Internet and World Wide Web to improve its bottom line of profitability. Another approach, which is the subject of this book, is Web-based service provisioning.

Service provisioning, while offering a potential boon to corporate efficiency and profitability in many ways, is less about business than about technology. This chapter is intended as an introduction to the concept of service provisioning for those who are not already steeped in technology matters. A reader who already understands the fundamental concepts of business information services may want to skip ahead to the next chapter. Readers who are a bit less technical in their orientation or who want a quick review will find this chapter helpful in orienting themselves to topics that are explored in greater detail later.

Information Technology As A Service

Information technology (IT) entered the business world in the late 1950s as part of the computer revolution. Initially computers were used to augment or replace manual business functions, such as file keeping and accounting. Data processing units were established within most large firms by the mid-1960s.

Historically, IT departments—originally termed Data Processing (DP) or Information Systems (IS) departments—were corporate cost centers rather than "profit centers." That is to say, the technology departments performed tasks to support other profit-making business activities, rather than generating revenues and/or profits for the company directly.

The value of these services was linked initially to their consistency and availability. Business units were pleased to have access on an ongoing basis to the services available from corporate DP. When the honeymoon ended, however, simple availability was determined to be a poor measure of IT service value. Business units redefined the value of their corporate computing capability in terms of the timeliness and accuracy of the information provided to them as information consumers.

As service quality demands increased, many corporate data processing shops began to assign dollar values to their service. Charge-back systems—methods for billing business units for the data processing services they consumed—were implemented by DP shops in many companies. DP managers saw charge-back as a means to underwrite, or at least justify, operating budgets—the costs for personnel and technology resources, including computer hardware and software. Inadvertently, these charge-back systems also created opportunities for competition.

In the late 1960s, independent data processing service companies were created by entrepreneurs to advance the notion of obtaining IT services from providers outside of the company. These outsourcing firms and service bureaus contended that all corporate DP amounted to the same thing—computations of information expressed as binary 1s and 0s. If a company could obtain the same quality of DP services from an external service provider, and at a lower cost than doing it themselves, vendors were confident that the quiet logic of cost-efficiency would dictate that they do so.

Merits of this argument notwithstanding, the view of IT as a business-enabling service is well entrenched. In the years that have followed, technology services have become so integral to many business processes that they are almost inseparable from each other. Testimony to this fact can be found in numerous cases of IT disasters and their impact on business continuity.

Over the past 30 years, natural and man-made disaster events have repeatedly shut down corporate computers and networks. Their designation as "disasters" implies more than an interruption of IT operations: These events are disasters when they interrupt the business processes that are enabled by the IT service. When they do, business grinds to a halt.

Twenty years ago, the dependency of business on IT services was less profound than today. Most large companies could revert to manual processes in the event of a DP outage and continue operations for several weeks until systems and networks were repaired. Today the same companies would likely be out of business, or at least severely financially damaged, by an outage lasting only a few days—or, in some cases, a few hours!

The point is that mission-critical business processes and the software applications that support them are very closely entwined. Few business professionals can perform their work without the support of IT services—whether they themselves interact with computers and use software applications directly, or act on the basis of information derived from application services.

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