Customer Evaluation of Application Services Provisioning in Five Vertical Sectors

Abstract

How value is created for the customer from e-business is a topic of much concern in academic and practitioner circles. In the light of the dot.com downturn, numerous e-business firms ceased to exist. This paper reports the findings from an ongoing research study on the development and decline of the application service provider (ASP) industry. Having witnessed the decline of the first wave of ASPs, with many failing to convince small and medium businesses (SMBs) of the value of adopting an ASP solution, the second wave calls for a more rigorous approach that clearly identifies the key performance areas and indicators of the ASP business model. Applying the constructs of strategic positioning, product/service portfolio, and value proposition, this paper represents the findings from 215 responses to a questionnaire survey on how potential and existing ASP customers evaluate the benefits and risks of ASP. The findings suggest that, if the ASP model is to succeed, vendors will need to carefully identify customer requirements and avoid the pitfalls that beset the first wave of the ASP model, which was largely based upon a technology push strategy.

Keywords

application services provisioning business value e-business values IT evaluation

Get full access to this article

View all access options for this article.

References

Ahn

(2001). A Framework for Certification and Audit of ASP, Journal of Systems Integration 10: 239–252.

Amit

, and Zott

(2001). Value Creation in e-Business, Strategic Management Journal 22: 493–520.

Bakos

(1998). The Emerging Role of Electronic Markets, Communications of the ACM 41(8): 35–42.

Benbasat

, Goldstein

D.K.

, and Mead

(1987). The Case Research Strategy in Studies of Information Systems, MIS Quarterly 11(3): 369–386.

Bennet

, and Timbrell

(2000). Application Service Providers, Will they Succeed?, Information Systems Frontiers 2(2): 195–211.

Caufield

(2000). Cover Your ASP, eCompany Now 2(1): 138–139.

Cassidy

(2002). Dot.con. Perennial Publishing, US.

Chatterjee

, Rajeep

, and Sambamurthy

(2002). Shaping up for E-Commerce: institutional infrastructures of the organizational assimilation of web technologies, MIS Quarterly 26(2): 65–89.

Clancy

(2001). The Insidious Resistance to ASPs, http://www.aspnews.com.

10.

Columbus

(2000). Realizing e-Business with Application Service Provision, Sams.

11.

Currie

(2000). Keynote Address: ‘Delivering Business Critical Information Systems as a Service: A taxonomy of application service providers. International Conference on Systems Thinking in Management, Deakin University, Geelong, Australia, 8–10 November.

12.

Currie

(2002). Application Outsourcing: A new business model for enabling competitive electronic commerce, International Journal of Services and Technology Management 3(2): 139–153.

13.

Currie

(2003). A Knowledge-based Risk Assessment System for Evaluating Web-enabled Application Outsourcing Projects, International Journal of Project Management 21(3): 207–217.

14.

Currie

, Desai

, Khan

, Wang

, and Weerakkody

(2003). Vendor strategies for business process and applications outsourcing: recent findings from field research. Hawaii International Conference on Systems Sciences, January. pp. 207–217

15.

Currie

, and Seltsikas

(2001). Exploring the Supply-side of IT Outsourcing: The emerging role of application service providers, European Journal of Information Systems 10(3): 123–134.

16.

Currie

, and Willcocks

(1998). New Strategies in IT Outsourcing: Major trends and global best practice, London: Business Intelligence.

17.

Dean

G.H.

, and Jackson

G.A.

(2000). Application Service Providers - Exploring the Theory of Evolution, London: Baird E-Services Publications, London.

18.

Ekanayaka

, Currie

, and Seltsikas

(2002). Delivering Enterprise Resource Planning Systems through Application Service Providers, Journal of Logistics and Information Management 15(3): 192–203.

19.

Eisenhardt

(1989). Building Theories from Case Study Research, Academy of Management Review 14: 532–550.

20.

Eisenhardt

, and Martin

J.A.

(2000). Dynamic Capabilities: What are they?, Strategic Management Journal 21: 1105–1121.

21.

Ferengul

(2002). Best Practices in Web Hosting Service Level Agreements. Meta Group, Stamford, CT, 31 January 2002 (available on-line: http//techupdate.zdnet.com/techupdate/stories/main/

22.

Gordijn

, Akkermans

, and van Vliet

(2000). What's in an Electronic Business Model? The 12th International Conference on Knowledge Engineering and Knowledge Management. (EKAW-2000, 2–6 October, Juan-les-Pins, France).

23.

Guah

M.W.

, and Currie

(2002). ‘Can ASP Model Rescue NHS Information System Strategy?’. The Fifth International Conference on Electronic Commerce Research (ICECR-5) (Montreal, Canada, October).

24.

Hagel

(2002). Out of the Box: Strategies for achieving profits today and growth tomorrow through web services, Boston, Mass: Harvard Business School Press, Boston, Mass, USA.

25.

Heart

, and Pliskin

(2001). Is E-Commerce of IT Application Services (ASP) Alive and Well?, Journal of Information Technology Theory and Application 3(4): 33–41.

26.

Howcroft

(2001). After the Goldrush: Deconstructing the myths of the dot.com market, Journal of Information Technology 16(4): 195–204.

27.

IDC. (2000). International Conference on Managing and Growing a World Class ASP Business. Hosted by International Data Corporation. 4–6 April, San Francisco, USA.

28.

Kauffman

, and Wang

(2001). Bid together, buy together: on the efficacy of group-buying business models in Internet based selling. Paper presented at fifth Annual University of Minnesota Electronic Commerce Conference in Lowry

P.B.

, Cherrington

J.O.

, Watson

R.R.

(eds.) Handbook of Electronic Commerce in Business and Society, Boca Raton, FL: CRC Press, 2002: Minnesota, Minneapolis, MN: CRC Press, pp. 27–28.

29.

Kern

, Lacity

, Willcocks

, and Zuiderwijk

(2001). The ASP Market-space Report: Mastering the expectations of customers, Amsterdam: CMG Benelux.

30.

Kern

, Lacity

, and Willcocks

(2002a). Netsourcing: Renting business applications and services over a network, Financial Times, Englewood Cliffs, NJ: Prentice-Hall.

31.

Kern

, and Willcocks

(2002). Service provision and the Net: Risky application sourcing?. in Hirschheim

, Henizl

, Dibbern

(eds.) Information Systems Outsourcing, Berlin: Springer-Verlag, pp. 513–534.

32.

Kern

, Willcocks

, and Lacity

M.C.

(2002b). Application Service Provision: Risk assessment and mitigation, MIS Quarterly Executive 1(2): 113–126.

33.

Magretta

(2001). Why Business Models Matter, Harvard Business Review 10: 86–92.

34.

Marchand

, and Jacobson

(2001). An Economic Model to Study Dependencies between Independent Software Vendors and ASPS, Electronic Commerce Research 1: 315–334.

35.

Miley

(2000). Reinventing Business: Application service providers, Oracle Magazine, November/December: 48–52.

36.

Neely

(2002). Business Performance Measurement, Cambridge: Cambridge University Press.

37.

Osterwalder

, and Pigneur

(2002). An e-Business Model Ontology for Modeling e-Business. 15th Bled Electronic Commerce Conference on E-reality: Constructing the e-Economy (Bled, Slovenia, 17–19 June.

38.

Papaioannou

(2002). Efficient Agent-based Selection of SLA Within ASP Service Model, Journal of Network and Systems Management 10(1): 63–89.

39.

Ross

, Vitale

, and Weill

(2001). From Place to Space Migrating to profitable Electronic Commerce Business Models, Sloan School of Management, 1–37.

40.

Silverman

(2001). Interpreting Qualitative Data, Beverley Hills, CA: Sage.

41.

Tebboune

D.E.S.

, Weerakkody

V.J.P.

, and Currie

(2003). Strategic Alliances in Application Service Provision: A theoretical perspective. Proceedings of the 2003 UK Academy for Information Systems (UKAIS) Conference, Warwick, UK, April.

42.

Susarla

, Barua

, and Whinston

A.B.

(2003). Understanding the Service Component of Application Service Provision: An empirical analysis of satisfaction with ASP services, Management Information Systems Quarterly 27(1): 91–124.

43.

Weill

, and Vitale

M.R.

(2001). Place to Space - Migrating to eBusiness Models, Boston, Mass: HBS Press.

44.

Willcocks

, and Lacity

(1998). Strategic Sourcing of Information Systems, Chichester UK: Wiley, Boston, Mass. USA.

45.

Yin

(2002). Applications of Case Study Research, Beverley Hills, CA: Sage Publications.

46.

Anderson

E.W.

, Fornell

, and Lehman

D.R.

(1994). Customer Satisfaction, Market Share and Profitability: Findings from Sweden, Journal of Marketing 58: 53–66.

47.

Anderson

J.C.

, and Naru

J.A.

(1990). A Model of Distributor Firm and Manufacturer Working Relationships, Journal of Marketing 54(1): 42–58.

48.

Anderson

J.V.

, and Sullivan

M.W.

(1993). The Antecedents and Consequences of Customer Satisfaction for Firms, Marketing Science 12(2): 125–143.

49.

Bitner

M.J.

(1990). Evaluating Service Encounters: The effect of physical surroundings and employee responses, Journal of Marketing 54(2): 69–82.

50.

Cooper

D.R.

, and Schindler

P.S.

(2003). Business Research Methods. New York: McGraw-Hill.

51.

Debreceny

, Putterill

, Tung

, and Gilbert

L.A.

(2002). New tools for the determination of e-commerce inhibitors, Decision Support Systems 34: 177–195.

52.

Desai

, Weerakkody

, Currie

, Tebboune

, and Khan

(2003). Market Entry Strategies of Application Service Providers: Identifying strategic differentiation. Paper to presented at the 36th Hawaii International Conference on System Sciences (HICSS-36), Hawaii, January 2003.

53.

Gartner (2001). Sanity Check on the ASP Opportunity, Gartner Group's Research Brief, http://www.gartner.com

54.

Hagel

, and Seely-Brown

(2001). Your next IT strategy’, Harvard Business Review October: 105–113.

55.

Hirschheim

, Henizl

, and Dibbern

(eds.) (2002). Information Systems Outsourcing. Berlin: Springer-Verlag.

56.

Keller

(1993). Conceptualizing, Measuring, and Managing Customer-based Brand Equity, Journal of Marketing 57(1): 1–22.

57.

Koza

, and Lewin

(2000). Managing Partnerships and Strategic Alliances: Raising the odds of success, European Management Journal 18(2): 146–151.

58.

Lewis

(1999). The New, New Thing. London: Hodder and Sloughton.

59.

Mahadevan

(2000). Business Model for Internet-Based E-Commerce: An anatomy, California Management Review 42(4): 55–68.

60.

Nesheim

(1997). High Tech Start-up. Saratoga, CA: www.Startupweb.com (isbn: 0-914 405-71-3).

61.

SCN Education B.V. (ed.) (2000). ASP - Application Service Providing: The ultimate guide to hiring rather than buying applications. Germany: Vieweg/Gabler.

62.

Timmers

(1999). Business Models for Electronic Commerce. Chichester, England: John Wiley & Sons Ltd.