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Application Service Providers

By Marc Osten
Michael Stein

Application Service Providers (ASPs) may well become a significant alternative for voluntary organisations with a small budget for information technology (IT) or those looking to outsource some of their IT requirements. So what are ASPs and are they a realistic option for voluntary organisations? This article in collaboration with TechSoup, answers some frequently asked questions about ASPs

  1. What is an Application Service Provider?
  2. What are the benefits of using an ASP?
  3. What are the risks of using an ASP?
  4. What should we do if we think that we might want to use an ASP?
  5. How do we choose an ASP?
  6. How do we find an ASP?
  7. Will an ASP replace our existing web site?
  8. Will our data be secure with an ASP?
  9. Will we be locked into a long contract?
  10. Does it matter that we don't have an in-house IT person?
  11. How do we backup our data?
  12. Is it OK to work with a Dot Org ASP? These are nonprofits. Do they know how to run a technology company?
  13. How do we know if an ASP is going to be in business for a while?
  14. What if our ASP closes down?

1. What is an Application Service Provider?

As an individual or organisation, you may already be using an Application Service Provider without realising it (e.g. if you have a web based email account from Yahoo or Hotmail for example). An Application Service Provider or "ASP" is a technology company that develops and delivers software tools over the Internet, usually for rent rather than outright purchase. These software tools are designed to provide specific services to meet the operational needs of organisations and their staff. Sometimes, these tools can complement and or replace an organisation's web site. Other times, these tools are simply standalone, but always accessible online. ASPs that focus on the not-for-profit sector offer services that are designed to meet not-for-profit needs, and virtually every kind of service is now available, including:

  • Accounting
  • Activism and advocacy (email and fax systems, legislative advocacy)
  • Content management and website maintenance
  • Data and database management
  • Donor and membership management (online fundraising)
  • Email messaging and Listservs
  • Event management
  • Group collaboration (virtual offices)
  • Online credit card transactions
  • Search engines
  • Web discussion forums
  • Website traffic analysis tools

There are over 300 ASPs in operation today that serve the not-for-profit sector. These ASPs are mainly but not exclusively based in the United States. However because services are provided over the Internet, physical location is not necessarily a big problem.

2. What are the benefits of using an ASP?

ASPs develop software products and make them available to organisations for an ongoing rental fee. When you use an ASP:

  • You're hiring an external company to build and operate a system for you, so the 'in-house' burdens of technical management can be lessened
  • You can access the service over the Internet from any computer anywhere with Internet access. This makes working from multiple offices, on the road, or from home considerably easier
  • The ASP takes care of regularly updating the software with new features, so your staff don't have to be involved, other than sometimes having to provide or go through some training to understand how to use any new features the ASP is providing
  • The ASP takes care of doing regular backups of your data that is stored in their system. Data stored with an ASP is frequently more secure than data stored in a typical voluntary organisation
  • You pay as you go with monthly fees, rather than having all the costs up front
  • Any computer with Internet access and a web browser can access the software, no matter what computer brand or platform (e.g. Windows or Mac). It is usually preferable to have a broadband Internet connection (such as ISDN, ADSL or faster) when using an ASP to improve speed and reliability of access
  • You can get up and running quickly. Because ASPs build their software tools once and then resell them over and over they can sometimes deploy a complete software solution in a matter of weeks
  • You get specialised technical support to help you with training and troubleshooting that is directly related to that particular product.

3. What are the risks of using an ASP?

The risks mentioned below are not in and of themselves reasons reject ASPs as an option, but are offered to help you plan ahead and have realistic expectations. Just because photocopiers get jammed for example doesn't mean we decide not to use them. We would encourage voluntary organisations to keep these ASP risks in perspective and apply some good planning and flexibility. This way if you do decide to use these tools, you are better prepared.

  • Although ASPs can save technical resources, they also can reduce your control and involvement with the systems you depend on. Should you have a serious issue with your ASP (such as poor response time to technical problems or unexplained service failures), it could result in taking a large amount of staff and / or management time to get the issue resolved, so you end up losing the time you planned on saving.
  • If you use an ASP to integrate different pieces of data together, this may necessitate changing the way you work, especially if staff are using different systems. Integration also creates a "super system" that will demand management.
    If your system had been made up of smaller, separate pieces in the past, the task of managing those systems was probably spread out. With an integrated system you may need to re-examine how you manage it, which could put a large burden on one staff member.
  • If your Internet connection goes down or your Internet Service Provider (ISP) goes out of business, you risk losing access to data or the ASP's services for the period your Internet connection is down.
  • Automatic software updates may be an ASP advantage, but not when they significantly change how the software is used. Your staff may access the software one day, only to find that menu items are in different places, or that a function they used no longer works the same way.
  • There is always a risk of a backup being lost or the data corrupted. If your ASP has a poor backup process, you could lose data you thought was secure. Always have a backup copy of your data offsite to protect against disasters.
  • One downside of the rental model is the long-term cost, which may greatly exceed the cost of purchased software. Rather than having to spend most of the money at one time, it will mean a constant flow of money to the ASP, which may be more difficult than the one time purchase for some organisations. The charge-by-use model also has a potential downside of increasing your overall costs if the service gets heavy use. You need to determine the value of the ASP service to your organisation.
  • Not all ASPs disclose fully that their services don't work the same way on Windows and on Macs, so be sure to indicate to the ASPs you plan to use what kind of computers you use and what kind of Web browsers you use.
  • Speed of setting up a project with an ASP may not be an advantage. A product may have hidden flaws or an inability to perform as promised due to the pressure to get it up and running quickly. Also, it's important for your organisation to take the time necessary to create a strategy and a plan for using an ASP.

4. What should we do if we think that we might want to use an ASP?

If you think an ASP might be a solution for your organisation, gather others in your organisation to discuss the 'system' that you think needs improvement. Is it something about your public relations work that you want to improve. Does this have to do with fundraising or your education programs? Is this about your data management? What is the system you want to improve? Be clear about that and then get the right people to the table to talk.

Now get the flipchart paper up on the wall and brainstorm. Talk about what is and isn't working with the current system. Think about what the systems would look like if they worked better. What 'exactly' do you want to see improve. This is the list that helps you decide if you want to use technology tools or strategies to improve systems and what those technologies might do for you. Then you can explore ASPs as the potential tool.

5. How do we choose an ASP?

Before diving in and choosing a provider:

Designate someone in your agency who will spearhead the effort to work with an ASP

And assemble a team to move forward with the selection process. Your existing technology team or any staff / teams that work on communications and information management within your organisation can often take on this work. If you currently do not have such a team then explore setting one up. You do not simply want an IT person to handle this without input and planning by staff from different sections within the organisation.

Perform a needs assessment to define your needs as simply as possible

An example of a general needs statement might be:

"We need to be more flexible in the way we allow people to make donations to us. An online donation tool that allows people to donate money with their credit cards would be great," or "we need to connect more closely with colleagues who work or live in different parts of the country. A listserv to communicate with our network of advisers across the country would be a great add-on to our current mix of communication strategies."

Then add other requirements you might have (for example, inexpensive or easy to use) that relate to your operations. Note that every needs assessment statement is grounded not in the technology but in the way the organisation does its business. Build this review into a more detailed definition of your needs, which will help you define which features and tools you might ask an ASP to provide.

Use this needs assessment when you're shopping for an ASP and when you're evaluating your progress towards selection. ASP selections, like any technology tools and strategies, should not be chosen without looking at your organisation's aims and operational systems. Fundraising, communications, materials development, education efforts, advocacy etc. - whatever you do, make sure that the ASP selection is grounded and connected to what you do, why and how you do it.

Search for ASPs that match your needs

To get a good idea of how a service is used and how it really works, speak with other not-for-profit customers of the service. To find those other customers, ask ASPs themselves, ask on listservs or ask in the TechSoup Community, and talk to other voluntary organisations and board members you know. Try to find organisations that use the service in the same way you plan to use it. Ask these three key questions to other organisations:

  • How do you use this ASP?
  • What was your setup experience?
  • Is their Technical technical Support support helpful?

This is a good way to learn about real world experiences with an ASP, but can't take the place of listing your needs and expectations as benchmarks for selection.

Consider the following criteria as you make your selection

  • Your needs for features and the functionality of each ASP
  • Pricing plans
  • Frequency that the ASP updates the software
  • The company's commitment to customer service and training
  • Testimonials from existing customers of that ASP
  • The business stability of the ASP

Understand the 'total cost of ownership' of working with an ASP. Monthly rental fees, training and technical support, any hardware upgrades, staff time for research, and contracting and management of the relationship all need to be factored in to understand what the total cost is. This 'total cost' will vary from ASP to ASP depending on the way they work and what which services they offer.

6. How do we find an ASP?

To select an ASP, try these online resources which show the options available:

There are many ASPs on the marketplace that are not listed on the above sites, and you may come across some that are very small and locally or regionally based. Regardless of where you find the ASP, the key to success is going through careful selection procedures to make sure you are contracting with a service that is reputable and will meet your needs.

7. Will an ASP replace our existing web site?

Sometimes an ASP can deliver a service that actually replaces your Web site entirely. This would be the case if the ASP was providing a complete content management system so you could easily update your site without having to write the code yourself. Other times, the ASP is only delivering a very specific service such as an online survey tool or a credit card collection system. In that case, the ASP tools would simply plug into your Web site and not replace it entirely.

8. Will our data be secure with an ASP?

ASPs typically design their systems to be as secure as possible, because they will contain information such as credit card numbers, bank debit instructions, client data, service records, donation history and donor mailing addresses. Be sure to ask a prospective ASP what efforts they make to protect your data.

Although not all ASPs ensure the highest level of security available on the Internet, generally your data is more secure with an ASP than in most voluntary sector organisation offices. There is always a risk that an ASP's security will be compromised, so be certain that you have a commitment from the ASP that you'll be immediately notified if there are any data security problems.

9. Will we be locked into a long contract?

The length of an ASP contract varies. Contracts can be as short as one year or as long as three years. Having a contract in place means that you don't have to renew it until it expires. If you want to terminate the contract, be sure that you're aware of any termination penalties. Many ASP contracts don't have termination penalties, but are merely set up for payment convenience.

10. Does it matter that we don't have an in-house IT person?

It's OK to not have an in-house IT person, as long as you've designated someone on your staff to select and work with the ASP. Maybe you will have a team of staff help choose the right ASP, but having one 'point-person' who interacts with the ASP is important.

11. How do we backup our data?

Each ASP handles backups differently, so it's important to discuss the process in detail with them. Most likely, the ASP will be backing up their servers for their own protection. However, we highly recommend that you always have a physical copy of your data that is up-to-date as protection against unforeseen disasters. It is not necessary to do this more than once a month, and you should discuss the mechanics of this operation with your ASP staff.

12. Is it OK to work with a Dot Org ASP? These are nonprofits. Do they know how to run a technology company?

It's perfectly fine to work with a not-for-profit ASP company as long as you apply the same criteria in evaluating them as commercial companies. It's also fair to ask a not-for-profit ASP a direct question relating to their not-for-profit status and how that impacts on their business development efforts.

13. How do we know if an ASP is going to be in business for a while?

There's no sure way to know how long a company is going to be in business, but here are a few tips:

  • Ask the company how long they plan to do business with not-for-profits
  • Ask about their business stability and ask to see an audited financial statement. See how they handle these questions. Your goal is to determine their willingness to share their business strengths and weaknesses with you, and to determine if they have sound financial backing.
    Analysing a financial statement can be very complicated and we do not advise you do much of it. The key is, how do they respond to these types of inquiries. Are they open or do they seem secretive?
  • Find out how long the company has been in business. Ideally, choose a company that has been in business for a year or more (so they've completed at least one fiscal year) and upgraded their software product more than once.
  • Look for ASPs that have created voluntary sector community advisory boards to assist them in their business and marketing development.
  • Ask the ASP about their contingency plans if they were to close down or be acquired by another company. How would they address your needs in this eventuality? Make sure that you understand how you would get access to your data stored in their system.
  • Ask for references from other nonprofits that have worked with that ASP. Ideally you want to see a sizeable voluntary sector client base as a demonstration that this ASP is able to serve voluntary sector needs.

14. What if our ASP closes down?

The best protection is to have this possibility addressed in your contract with the ASP. The contract should state specifically what will happen to your data should the organisation cease to exist or if it is bought by another company. You can agree to a system where every other week a copy of your data is sent to someone in your office, so you always have a copy of it.

The ASP can be responsible for holding your data until you find a new place for it. If you keep confidential information on an ASP, it is also smart to detail in the contract what liability the ASP is willing to accept if your information is compromised.

ASPs that have a high level of confidence in their security may be willing to accept a certain level of liability should there be unauthorised access to your data. We recommend that you always have a physical copy of your data that is up-to-date as protection against unforeseen disasters.

You should also discuss with your ASP during the contract process what will happen to the software code that runs your service should they go out of business. Some ASPs offer to put your code into an escrow account, so that if they go out of business, you still own the code and can move it to another service.

About the authors

Marc Osten
Marc Osten is a social change activist and third sector consultant at Marc Osten Consulting (formerly Summit Collaborative, which he founded).

Michael Stein
Michael Stein Internet Consulting. Michael Stein is a nationally renowned Internet strategist with 15 years of experience working with nonprofits, foundations, labor unions, technology providers and socially responsible businesses.


ADSL, Backup, Broadband, Browser, Database, Hardware, Internet, ISDN, ISP, Listserv, MAC, Network, Software, Standalone, Web Browser, Web Site, Website

Published: 7th January 2002 Reviewed: 24th June 2010

Copyright © 2002 Marc Osten
Michael Stein

All rights reserved

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