One size does not fit all

Application service provision (ASP) has not taken off in manufacturing: although some have been happy enough to hive off non-core functions like payroll and business expense administration, the number prepared to trust their bread-and-butter ERP and SCM (supply chain management) to third-party hosting remains small. There are signs of another push into this area by IT vendors with something a little different. ERP big boys JD Edwards and PeopleSoft, for example, both announced much more flexible variants early this year (www.mcsolutions.co.uk reference library). In JDE’s case, it partnered with Hewlett-Packard and system integrator Prestige Systems to deliver its OneWorld Xe ERP-plus system under a managed services contract covering consulting, implementation, staff, support and even financing. PeopleSoft promptly followed (also with HP) with its ‘eCenter’ ASP, which hosts and delivers Internet applications. Both companies say that it’s taking off well in the US – but as yet there’s little sign of the UK seriously joining in. In theory, offerings like this are deeply tempting. They provide a half-way house to total outsourcing, which is well established but seen as the preserve of larger companies. Such services put key parts of that offering within the reach of SMEs. They cut out the issues of implementing systems and managing IT infrastructure, which you really don’t want, and they remove manufacturers’ dependence upon a small coterie of IT staff which – in a skill-starved market – leaves them open to threats from poaching. A matter of trust But there are still drawbacks. Quocirca is a specialist in this area, giving both vendors and end-users independent advice. It helps users to minimise risks with hosting, and to construct appropriate service level agreements (SLAs). Director Clive Longbottom is frank about the dilemma faced by manufacturers in particular. “Everyone understands that hosted solutions can give them a ROI (return on investment) for a known cost – even if few actually know the real costs of their existing applications. But companies have a problem forcing their hands down to sign the contract because their hearts are saying ‘I don’t trust ASPs’.” Seems there’s still need for ‘education’ – at least to get beyond the current understanding that outsourcing gets rid of technology issues but compromises security. Many may find it hard to believe Longbottom’s assertion: “I can pretty much guarantee that, provided you choose with care, security with a hosted solutions company is going to be better than it will be in-house.” But it’s more than that: fact is, after the rise and fall of ASP companies offering software effectively as a commodity, we’re all even more wary – so one of the issues today is distancing software/system ‘hosting’ from ‘old’ ASP. It’s important to understand that those who set themselves up as pure ASPs were – in a market that failed to materialise as they hoped – fundamentally limited. By providing all the facilities and then having to run them at say 50% occupancy, they set themselves and their backers financial targets they couldn’t match up to. As Longbottom says: “The big outsourcing companies had the data centres anyway, so weren’t driven to recoup their investment in a short time. Those who are still doing well – like the CSCs of this world – are the ones who said ‘Give us your IT and we will manage the solution’.” And there’s a world of difference, not necessarily in the offering itself – which after all could always be tailored – but in the sustainability of the business behind it. Good hosting providers today encourage potential users to consider giving them their biggest headaches, and an SLA derives directly from these. From that point on, it’s not rocket science: they know the issues, the requirements and the costs, they have the infrastructure and they’re always going to be able to afford more skills than you can – at least at the raw IT level. So everybody can win at whatever level they feel comfortable, assuming appropriate industry knowledge. All that said, with a few exceptions, IT vendors serving the SME manufacturing sector are as yet doing little more than paying lip service to this. Pat McCarthy, for example, managing director of systems supplier IEGL, says his company could provide its ERP and the rest as an ASP. But he adds: “If the demand increases, it is something we will look at… but I’m not sure it ever will.” He’s of the school that sees ASPs as the old bureaux under another name – and people walked away from them not just because cheaper computing finally made it financially viable, but more significantly, because it gave them flexibility and control. His observations: “Most people, given the choice of having things under their own control or someone else’s, will always trust themselves more than outsiders. So, if the costs aren’t hugely different – and so far, they don’t appear to be – they prefer to manage things themselves.” And he adds: “There are all sorts of things that are done over time, even in relatively small implementations: reports to be written and amended, PC users who need bits of advice, extra bits of software to add on, printers to be moved. The idea that you can outsource all of that as and when required … lacks some credibility.” The point is that in the UK the vast majority of manufacturers are small, and everyone’s application is slightly or seriously different. Likewise, everyone’s resources and objectives, attitudes and comfort zones, manufacturing business IT status and preferred methods are different. So there’s always going to be different criteria and requirements governing system implementation, customisation and ongoing development. The cardinal words here have to be control and flexibility, and what’s needed is practical compromise. IT consultancy Atos Origin offers an application management service which it believes cuts the costs and issues in running smaller or legacy applications. The firm’s Martin Styler says it provides a real advantage for the SME in that it fills a space several stages before the full outsourcing model. “One of the problems with full outsourcing is that, although you still have a high level manager involved, at some stage you hand over the ‘nitty gritty’. There are limits “For some this is fine – but not for others. Smaller companies tend to be closely intertwined with their IT and they don’t like the sound of that. If it’s something like [QAD’s] Mfg/Pro, for example, we can bring benefits by looking after that system but under their guidelines. Companies know their own manufacturing priorities. If you want to replan your production 10 times a week rather than five, you need that flexibility.” He cites a discrete manufacturer that wants to trial the hosting of two systems that are currently managed by a specialist freelance contractor. The new route will cut costs and also provide some dependability. “The approach needs to vary according to the application as well as the customer. Some applications are still under development: some are fixed legacy ones that still need to be maintained. Some will need current and some really obscure skills – it’s horses for courses.” And that’s the nub. Truth is, some companies genuinely want to wash their hands of any type of IT responsibility, but they’re few and far between. Others want to achieve that but do it by having some of their own staff transferred to a hosting company. Most are likely simply to want to be tactical about it, and have specific aspects of their business IT built and/or handled at arm’s length as a service. That’s what good and successful hosting companies will increasingly offer. Giving it a name – hosting, ASP, outsourcing, whatever – tends to imply only one solution on the table. But the value for users comes from being able to flex according to ever changing needs and styles, with the assurance of partner-providers that not only have the resources and the answers, but are going to be there for the long term. Services that match this description are already here and more will follow. Check for service providers on the MCS website and consider doing some piloting on sensible projects first.