ASP model fails to draw SMBs

CIOL Bureau

BANGALORE: If the ASP enthusiasts hoped to see their fortune revive in the SMB mart, they are in for disappointment. The SMBs seems to have more apprehensions on ASP model than ever before.

Although a recent Nasscom report reveals that the ASP model might kick off with the SMB segment, not all SMBs view the ASP model as viable business model since ASPs are still in their infancy.






While the CIOs agree that maintaining in-house IT systems requires a capital investment far beyond the reach of many SMBs, a few of them are however skeptical about the effectiveness of ASP model.

"Not all SMBs are expected to make the sudden shift to the ASP model. SMBs are gradually progressing the learning curve. They computerize first, then they go on the Internet and then try the ASP model," says Anurag Mishra, EDP manager of a manufacturing industry.






Few SMBs who are yet to computerize and those who are not Internet-savvy might find the ASP model too fast for them to catch up, he added.

At the same time, some of the CIOs point out that not all enterprises are comfortable with ASP model even if they are ready to avail of it, since outsourcing their IT services has security implications.






"How can you be assured of confidentiality of data you possess if someone else designs and handle the system that stores critical data?", asks Anurag.

Many CIOs point out certain drawbacks, which include extensive customization, integration issues with the back office, increased complexity in the application and decreased flexibility in terms of the application’s operating environment.

Besides the top management needs to be convinced about the veracity of the financial stability of the service provider and their apprehensions of data security issues with third party controlling critical business data.

Says A.R. Subramanian, Manager (Systems), Essae Teraoka Ltd, " ASP model may not suit the SMB segment as enterprises are skeptical of sharing critical information and to have data existing in third party servers. Moreover, ASPs offer least customization, which is a major drawback. Besides convincing the top management and persuading them for hosted applications is a challenging task"

K.L.Srinivas Rao, Manager (Systems), Fouress Engineering, concurs that "ASP model will take off only if the pricing structure is attractive. In many ASP offerings, though the service providers host the applications, the licensing fee has to be paid by the enterprises themselves and it comes with no customization. Customization is key for SMEs as their business operations and processes are unique to each enterprise segment. Most of the time customization is carried out in-house as company personnel know the inherent needs and requirements of the enterprises."

Besides, he says that data security is a major concern for the top management of the companies and a challenging task for the CIOs/IT managers to change the prevailing mindset.






However there are many other CIOs like Ravikiran Mankikar, Chief of IT, The Shamarao Vithal Co-operative Bank, who feel that increasing costs of infrastructure and manpower, retention of skill sets and business competition will compel the SMBs to favor ASP model.

He says that SMBs will go for ASP model when applications that can be easily outsourced or those that take a major effort in development if done inhouse. Application in the areas of ERP, CRM, Purchase and to some extent Supply Chain will drive SMEs to adopt ASP model.

Says BK Khaitan, Chief Manager-IT, RPG Cables Ltd that, " I feel that it will be very economical for industries at SMB sector. Besides the cost, there is no risk of technological obsolescence as all the hardware and software will be provided by the service provider. The companies can concentrate on core business issues and not unduly worry about investments in technological upgrades. This model fits well in today's cautious economic scenario and cost cutting exercise in most of the corporates".

Opines R.Sekhar IT-manager, GCMMF," with the cost of communication infrastructure coming down, soon this model is going to be a reality for business houses and this model would be feasible for the SMB sector".






While the debate over the effectiveness of ASPs continues, clearly SMBs are following a 'wait and watch' policy. Though most of them are aware of the benefits of ASP services, they are monitoring the reactions of some of their counterparts who have already adopted it, which is only expected as the companies cannot afford any monetary loss should the ASP model fail.