Leap of Faith

On paper the idea of renting software applications over the Web has a great deal to offer. The application service provider (ASP) model offers businesses an opportunity to sidestep the cost — and headaches — of setting up and maintaining IT infrastructures for a monthly rental fee. However, since a flood of ASPs charged into the market a year ago little has happened.

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By  Greg Wilson Published  April 29, 2001

Leap of Faith|~||~||~|On paper the idea of renting software applications over the Web has a great deal to offer. The application service provider (ASP) model offers businesses an opportunity to sidestep the cost — and headaches — of setting up and maintaining IT infrastructures for a monthly rental fee. However, since a flood of ASPs charged into the market a year ago little has happened.

Nearly all the startups ran into a brick wall when trying to convince local businesses, that the ASP model was the way to go. In a region, which had always displayed a strong reluctance to outsource any service to a third party, it appeared that there was little chance companies would race to embrace a software rental model. “It’s been pretty tough to get around the customer mindset,” admitted Premchand Kurup, manager, MMI Technology Solutions, earlier in the year. (See ACN/16/02).

However, after extensive evangelising, local businesses are starting to warm to ASPs. Saudi-based Al Zuhair Group has left its IT worries at the doors of Comtrust and signed up to rent Sage C/S 3 applications from the software vendor’s local solutions partner MMI. The family owned company, with a number of diverse business interests, has been experimenting with an ASP model since December 2000 and recently went live. “Every transaction goes over the Net straight to Comtrust, we’re not doing anything locally,” says Talal Al Zuhair, a partner within the group. “We like to be forward thinking, this is a calculated risk that saves [the group] a lot of IT headaches and allows us to concentrate on what we do best,” Al Zuhair adds.

As the business expands geographically, into new markets such as Dubai and Qatar, the Al Zuhair Group was finding its existing troublesome network environment too expensive to maintain. The ASP model fits with the group’s increasingly web-centric approach to market. “The rationale was to deal with the IT headache of maintaining your own in-house IT systems; maintaining your servers [and] maintaining the user base,” says Al Zuhair. “It allows us to have no borders… I can look at the Gulf as my market now,” he adds.

“The nature of the business is changing, [we] have salespeople moving around different locations, [we] have projects based away from the head office and regional offices and Sage’s product allows [us] to connect over the Internet.”

Al Zuhair Group has gone the whole gamut, renting Sage C/S 3 modules, running on the Windows 2000 servers and hosted with Etisalat’s Internet infrastructure subsidiary Comtrust in Abu Dhabi. The web-based applications enable the trading company’s management and sales staff to hook to the Internet and “see what is happening at any one time,” says Al Zuhair. The ASP deal has enabled the business to halve its IT budget almost instantly, and develop the flexibility “to be in touch with our data in real-time, on the move.”

Currently, Al Zuhair Group is accessing its applications via a dial-up connection. Sage’s C/S 3 judges the amount of data travelling down the line and compensates for the reduction in bandwidth available in the connection to Comtrust. “[C/S 3] works really well over the Internet,” says Al Zuhair. “With connectivity, I had my fingers crossed. We started this off on a trial basis for three months while we had our old Tetra/Sage product running in parallel. The Internet connection was of course being monitored to see if we get the speed required for the application to run,” comments Al Zuhair.

Talal Al Zuhair reports the performance as “satisfactory.” But he adds, since the organisation has been in testing with Sage, MMI and Comtrust the dial-up performance in Saudi has improved dramatically. The Internet connection “is stable now.”

Although Al Zuhair Group has managed to obtain stable performance from its dial-up line the speed of the connection has given rise to some change management issues. Many employees that were used to working on the company’s local area network found the delay of working over the Web frustrating. “The problem anybody will have is from the users,” says Al Zuhair. On the Internet the “response time is much slower than you would get on your own network inside your company. Give that to a user and immediately he’s going to say, ‘this thing’s too slow, I can’t work.’ But you’ve just got to encourage users [that this is] the speed the Internet works at and to get used to it.”

By outsourcing its IT infrastructure Al Zuhair Group has also effectively dealt with its security issues. Although Talal Al Zuhair is aware that Comtrust’s parent company Etisalat has been hacked within the last 12 months, he’s not concerned for the integrity of the company’s data. “Everybody gets hacked — but you want to make sure that the [company] being hacked has the ability to stop it, analyse it and the ability to fight it,” says Al Zuhair. “The difference is that a corner shop providing the service wouldn’t have the ability — neither technical nor financial — to stop it happening again,” says Al Zuhair.

Comtrust’s security infrastructure was a big deciding factor for Al Zuhair Group, when taking the leap of faith and going the ASP route, adds Al Zuhair.

But will Al Zuhair’s switch to an ASP model mark the beginning of a landslide towards the ASP model? ASPGulf, a Dubai-based ASP recently went live with one of its long term beta clients and others are expected to follow. However, the full benefits of the ASP model won’t be realised until organisations begin moving on mass to the software rental model. Only then will ASP be able to leverage economies of scale to offer companies ‘irresistible,’ software rental prices. After being live for a few weeks, Al Zuhair is able to measure its savings at between $50,000-to-60,000. With such possible savings on offer other companies are likely to tread the ASP route.

Al Zuhair Group is planning to expand its use of the ASP model to include its office productivity software. This would remove the remaining IT infrastructure worries says Al Zuhair.
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