Microsoft Dances with ASPs

Last week, Microsoft announced the general availability of its Complete Commerce Program for Application Service Providers (ASPs). This formal announcement marks the beginning of Microsoft's new application hosting business initiative and brings the company's cooperation with ASPs out of the pilot phase and into general availability. According to Microsoft, the new program lets ASPs host “scalable, highly customizable transaction services for medium and large businesses.” Among the applications cited for hosting were Microsoft Exchange Server messaging, Office 2000 collaboration, corporate purchasing, media streaming, and line-of-business application services on the Windows NT Server platform. Application hosting offers a new model for providing solutions to companies where the complexity of managing the application and its infrastructure shifts to a service provider. Under this model, the service provider hosts an application, and the enterprise or customer dials into the service provider to use the application, in a pay-for-play system. The client saves on installation and maintenance costs and compensates the service provider for providing a well-maintained, well-service application. The ASP model is most appropriate for large-scale, complex applications such as enterprise accounting and enterprise resource planning (ERP). However, the rise of the Internet and the expectation of better Internet connectivity to come has excited many software giants such as Sun Microsystems, Oracle, and Microsoft into exploring this new application delivery scheme. A widespread expectation in the industry is that vendors might successfully apply the ASP model to small businesses, as well, making a virtual Internet office a real possibility. You can expect to see these services broadly available in the next year. As part of a beta program, Microsoft has been testing hosted BackOffice applications with potential partner ASPs over the past few months. Last November, Microsoft began a pilot program with 10 ASPs. The company has since expanded its partnership to 15 other ASPs, including Concentric Network, DataReturn, Digex, Exodus, GTE Internetworking, USInternetworking, Interliant, MCI WorldCom, NaviSite, US Web, and Qwest Cyber.Solutions. Companies providing solutions include Equant, which offers managed Exchange hosting; Qwest Cyber.Solutions, which offers managed SAP R/3 hosting; and Siebel on NT Server and SQL Server. Equant has 8000 Exchange users in 135 countries and expects to grow to 12,000 users by next year. In one current program code named Central Park, Microsoft is working with ASPs, their customers, and their trading communities to host specific business networked application services. Central Park lets an organization deploy a Web site, custom applications, and its line-of-business applications and link them to business partners. Microsoft's partners on the project access Central Park over secure VPN connections. Interested parties can download the Complete Commerce Program deployment kit from Microsoft's Internet Services Network (ISN) Web site at The Web site contains materials to market service and operational procedures to launch hosted commerce services. Microsoft anticipates adding deployment kits this fall to support line-of-business, knowledge management, corporate purchasing, customer relationship management, and financial management application hosting. Several industry observers have noted that Microsoft’s announcement coincided with Citrix Systems' thin-client convention. Some see Microsoft's announcement as a response to Sun’s dramatic unveiling of its program to allow free usage of its newly acquired office suite, StarOffice, over the Web. However, Microsoft has been developing this program for some time now, and it reflects a general interest among the Microsoft management team to protect its software application business by providing all possible delivery methods. "We are seeing a lot of demand from customers for applications hosting on the Windows NT platform to save on total cost of ownership," said Steve Ballmer, Microsoft president. "Microsoft has been engaged in a variety of commercial licensing, certification, and application service deployment pilot projects over the last year to better understand market requirements across a variety of applications and customer needs. Based on this learning, several of these projects are now moving to the next phase or into full production."

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