The Web, ASPs and Outsourcing Create a New Business Paradigm

Introduction

At the millennium the Internet and the World Wide Web have begun to shift toward a dramatically new paradigm. Initially, the Internet was largely used as a way for companies and individuals to communicate through electronic mail, newsgroups and chat rooms. Over the past three years the emphasis has shifted to making the Web a channel for electronic commerce as entrepreneurs and corporations seek to sell merchandise to consumers directly online from Web sites. The business-to-consumer model – seen in the explosive popularity of Amazon.com, CDNow and dozens of software sites – captured the attention of investors, Internet users and the media.

While it seems logical the Internet will become another channel for retailers along with brick-and-mortar stores and catalogs, analysts now see a much richer opportunity than the business-to-consumer market: The business-to-business (BtoB) sector.

Why? Just consider the numbers. Forrester Research reports BtoB transactions will total $43.1 billion in 1999, as opposed to $7.8 billion in the BtoC market. In Y2K, the numbers jump to $109.3 billion and $18.7 billion respectively, and in 2003 the BtoB will surpass the $1 trillion mark in sales, 10 times more than BtoC sales. (That number, although enormous, would represent only 10 percent of BtoB transactions in the U.S. annually.)

What accounts for the difference between BtoB and BtoC? Consumers buy a few CDs or books for $50 at a time, a business may buy $15,000 worth of parts on one visit to a BtoB Web site. Intel does $1 billion a month on its Web site, fully half its annual sales. Dell Computers sells several million dollars worth of computers and accessories at its site every day. Craig Barrett, Intel’s CEO, told the Associated Press in October that “the real bulk of e-business is going to be what’s underneath the tip of the iceberg. It will change the way we do business with our customers and our suppliers.”

The BtoB market overall is worth $20 trillion annually in the U.S. and $60 billion globally. Eighty five percent of all transactions in the US economy involve are BtoB, with a mere 15 percent BtoC. The money on the Internet is clearly in BtoB and the money betting on the Internet is headed in the same direction.

As BtoB evolves so will an emerging trend by software companies and dot.com companies to renting software online. Called “Application Service Providers”, this new generation of technology firms generally focus on deep and narrow application opportunities such as ERP, SFA, CRM and HRIS. Large companies such as Microsoft, PeopleSoft, Oracle, Sun Microsystems and Lawson all have ASP initiatives in play. Defined broadly, ASPs are turnkey services allowing customers to rent software with no custom code required on the customer end. They work off an recurring revenue model, just like a utility. Channel players, ISVs and startups have begun to create applications available for rent on the Web.

Adding to palette of ASPs has been a movement toward outsourcing of IT, HR and other business functions, allowing corporations to concentrate instead on core competencies. The concept of renting applications and outsourcing or intersourcing – more on that later – works into the business of the future, where only core competency will matter and where constantly updating applications will making renting rather than buying applications the preferred method of doing business. The obvious customer for both ASPs and IT outsourcing are small to medium-sized businesses who cannot afford traditional high-priced enterprise applications and the huge cost of an IT staff. More than 85 percent of all American businesses fall into the small-to-medium category.

Experts identify six factors as propelling the growth of ASPs:

• Customers have distributed workforces that can automated more easily through the Internet than other means.
  
  

• IT overhead has caused firms to look to outsourcing.
  
  

• Developing secure, virtual private networks costs a great deal; ASPs can offer their own security system to customers, saving the hassle of implementation.
  
  

• The growth of “portals” show users like aggregated Web-based services and the popularity of Java has shown that downloadable applets can be possible across all platforms. Applications can therefore work the same way.
  
  

• Oracle, SAP and AG have ASP programs underway. The push is on to create a new marketplace for ASPs.
  
  

• Network-centric computing continues to grow and the collaborative-style of business makes software of the kind rented from ASPs attractive.

For now ASPs exist mainly in the computer world but a logical extension would be into the e-service world. A textbook publisher could rent chapters to college students who are not required to read the entire book for a class. A legal publisher might rent only case law relevant to an attorney’s needs for a particular client. A training company might rent video training sessions deliverable over the Net. A finance company with a particularly expensive piece of software could rent it by the month to brokers and bankers who could not otherwise afford it.

Another online trend is the importance of trusted relationships and “communities” has grown dramatically on the Internet. Some of the fast-growing sites on the Web have been Angelfire’s page building site and Tripod. These fast-growing sites offer users a chance to chat, to build a site, to get their email and to share information on a variety of topics. Specialized content – often created by the users themselves – have become enormously popular on the Web. Once people find a homestead on the Web they stay, as seen in America Online’s still skyrocketing membership. Once communities establish a homestead of users, they in turn can begin charging others for access to their members.

Agiliti believes thousands of communities will come online in the coming years, some based on employers, others on organizations or passions. an enormous number of e-service providers to select from when procuring a produce or service. Communities will be begin to serve as intermediaries in helping users find and buy information, products and services through everything from chat rooms to better-business-bureau-style ratings.

Although a key advantage of the Internet initially was the removal of intermediaries between the seller and buyer – allowing for a direct relationship that would result in lower costs – the sheer amount of services being offered has resulted in clutter and confusion for many workers and consumers. A new model for Internet commerce revolves around aggregating e-services approved by an employer or third party representative who select best-of-breed solutions. Intermediaries in the form of communities will help guide companies to highly regarded e-services aggregated by category or industry, insuring a form of quality control currently unavailable.

Agiliti, Inc.’s products and services have a role to play in each of these trends, ranging from Bto-B growth to the coming age of ASPs to outsourcing and providing a framework for best-of-breed solutions within an e-commerce environment. Each part of our business model builds on an aspect of these trends sweeping the environment while leveraging our technology and expertise to face business challenges in a new millennium.

Agiliti’s Digital Utiliti Answers The Challenge

With the trend toward BtoB, ASPs and the growing importance of communities, Agiliti developed a unique “Community Server” to provide businesses mission critical services in the new Internet landscape. The server leverages Agiliti’s already strong IT consulting practice and burgeoning Internet Service Provider (ISP) practice which came out of a recent acquisition of gofast.net, one of the leading business-centric dedicated ISPs in the Twin Cities. The acquisition will serve as a foundation for the company’s server applications by providing Agiliti an opportunity to sell a complete suite of services to customers, ranging from high bandwidth Internet connectivity to Web hosting. In addition, gofast.net’s current clients, numbering more than 400, offer a potential customer base for Agiliti’s new server solution.

The foundational IT and ISP services allow Agiliti to offer customers a total solution. Gofast.net provides T1, ISDN, DSL and ADSL connectivity with virtual private networks. It offers advanced network services such as firewalls and proxy services, virus protection, remote backup, network monitoring and management, web site and application hosting, web site development and server co-location. In addition, Agiliti’s IT component offers capable experts on networking, LAN, WAN development and so on.

Agiliti’s new server, the killer app Digital Utiliti, creates for users a portal-like customizable “digital dashboard” where programs from ASPs can be rented, where information about a subject or company can be aggregated and displayed, where users can share information with their communities through chat rooms and newsgroups, where email can be sent and captured, where common applications can be deployed. The dashboard itself has similarities to portals such as Yahoo and Excite but is dramatically different in key areas. A portal gives users information – weather, news, email, stock quotes and so forth – while providing a gateway search engine to other sites.
The DU, in contrast, creates an entire cyber-town square of a community where participants in a company or in communities of practice–lawyer, doctor, accountants–can capture information relevant only to their employer, profession or interest from one place. DU can aggregate narrowly and broadly-based data information ranging from company announcements to weather, best-of-breed ASPs, chat rooms and email, calendaring and intranet services. Key to the digital dashboard is the “digital vending machine” where users can rent applications and subscribe to informational resources. Agiliti will act as a third party reseller of ASP services to its clients.

The difference between the DU model and that of a portal comes down to the concept of communities of practice (COPs). Whomever starts a community of practice will be able to leverage its expertise in a particular field and provide others in their speciality with a less cluttered, more focused online experience. They will become the intermediaries in an online world too crowded for professions in need of useful information immediately, not after surfing five search engines. They will also be able to provide a place, a community, where COPs representing all forms of passion and profession can share information with one another in a well-organized online homestead, as well as purchase e-services from ASPs and others in a trusted and secure environment.

The trade press and media have made special note of “communities” being a particularly important vehicle in Internet commerce. Communities have been based on homesteads (Geocities, tripod.com), special interests (The Mining Company, Suite101.com), geography (Total New York), chat (TalkCity) and commerce (Amazon.com). Agiliti is not proposing to go out and create new communities – indeed, quite the opposite. While current Net thinking on communities calls for aggregating people with shared interests, Agiliti calls for servicing clients who already have created real-time, real-life communities and require an online presence for any number of reasons. Agiliti’s business model and goals center around the idea of mainly — but not exclusively — working with communities which already exist through a profession, a workplace, a client relationship, a professional organization or even a hobby.

The Foundation Of The DU: A Total Solution

Agiliti will augment the DU’s capabilities through offering clients a broad range of add-on services, among them:

Gofast connectivity services such as T1, ISDN, ADSL and virtual private networking, and advanced network services, including fire and proxy services, virus protection, remote backup, network management and monitoring and application services (server co-location, web site hosting, application hosting, web site development services).

Advanced DU Services, including market-facing applications such as Client Relationship Management systems, sales force automation systems and sales configuration tools.

The Argument For DU

The advantages to such a system are numerous. Companies can better control disbursements for ASP services through a centralized process of procurement Agiliti offers clients. Under this system, clients can better monitor and control procurement by employees. Billing becomes easier because Agiliti will aggregate ASP charges and administer them in one bill to a client. Depending on what services a client purchases from Agiliti, an itemized bill could include services for gofast.net, IT support and consulting and DU services such as the total ASP rentals and any product purchases made online by department and person. In essence, the client’s entire Internet operations’ would appear on one invoice.

The digital vending machine concept embalmed in the DU server structure offers the following features on a very elegant blank canvas:

Intersourcing: The provision of traditional ISP services, internal email, Web site hosting, office automation, desktop applications.

• A customized interface.
  
  

• A customized Web publishing template and database capable of controlling which users can what content as work flows through the system.
  
  

• Administration, invoicing, presentation completely provided by Agiliti.
  
  

• Content, both provided by the client for his employees or communities of practices, and meta-content of the sort available on the Web through specialized and broad news vendors. Client information can also be posted from public relations departments, community of practice participants, experts in various fields and others and made available gratis or on a per article fee. Information will be archived on a searchable database.
  
  

• The ability to buy and track purchase of products through ASPs and through online vendors. Clients can monitor expenditures by various departments in real-time, give corporate leaders ASP budgets and show purchasing by division and employee.
  
  

• The ability to buy and track e-services procurement by staff.
  
  

• The ability to insert sponsorship and advertising into the interface.
  
  

• The opportunity to create bulletin boards, chat rooms and online interview sessions for employees or members of a community of practice.
  
  

• The opportunity to create a “community of practice” based on a profession, a passion, a hobby, a lifestyle, a business relationship, a trade organization.

The DU solution is all about creating communities, sharing information, aggregating people who share an employer or a profession or a passion or membership in a service organization. It’s about allowing how those members can share insights and knowledge on the topic at hand, make a recommendation on a product, ASP software or service. It’s about centralizing the billing and data for COPs providers and giving them the kind of tech support they need. It’s about focusing content toward the right audience and creating opportunities for partnerships between Agiliti and COPs and Agiliti and employers.

Agiliti is offering a canvas and a toolbox to the next generation of entrepreneurs and corporate visionaries.

Applications of Digital Utiliti

The DU application will work in four major environments: dotcom companies, intranets, extranets and vertical organizations, such as trade groups. Agiliti will market the product beyond these categories, but they will represent the primary customers in the first iteration. Each environment is perfectly suited to the digital vending machine concept augmented by Agiliti’s IT support. And, each environment has a community of practice already present and potentially in need of a technology for information sharing, procurement and other activities. Let’s talk a closer look at how each application will work.

Dotcom Companies

Agiliti has teamed with Mike Osterholm — the former state epidemiologist and a national expert on food-borne diseases — on implementation of the DU servers for his new company, Infection Control Advisory Network, Inc. ICAN will sell content on epidemiology on a subscription-based Web site supported by Agiliti’s DU and hosted by its connectivity services. The site aims to get sponsorship, with management and billing completely handled by Agiliti. ICAN can eventually add ASPs to its site, among them the ICAN credit union button, including discount stock brokerage, stock ticker, credit card and other commerce services. ICAN cares less about branding these services and more about offering them to subscribers, and receiving a margin for various transactions. Agiliti handles all the underlying credit card authentication and billing for each service provided.

Extranets

The DU application to the extranet would be a training site, establishing a network between customers and suppliers. Where once printed newsletters contained information on how a company’s clients — and potential clients — could use their products, today online newsletters and contributions by clients would form the core of an extranet DU application. Clients could participate by submitting application briefs and by share problems and issues with the company and other clients. It’s a highly interactive engagement. Clients and customers could also share information on ASP services and have an opportunity to buy company add-ons and services that compliment current product lines.

Intranets

Company information, internal email, chat rooms, company-approved ASPs and other functionality would form the basis of a DU intranet application. Employees could receive daily news briefs from company management, see an approved list of ASP vendors and determine whether their departmental budgets will allow for rental software purchases, see a calendar of company picnics, see of list of solutions to common problems involving purchasing, or parking or whatever, make changes to their benefits, 401 (k) plan and so forth. The DU becomes the company’s electronic bulletin board, mail center, complaint line, online HR online resource, public relations center and ASP clearinghouse.

Vertical Markets

Agiliti believes trade associations will find the DU a great source for their managers, employees and members. The company has a partner in the American Academy of Neurology in St. Paul. The AAN has the concept of doing electronic publishing on the Web for members instead of printed publications, as it does now. Agiliti currently hosts the organization’s Web site, intersourcing needs and e-services for the purchase of AAN products, as well as those related to neurology. In addition, the AAN has created a separate company that will license this paradigm–including Agiliti’s technology–to other medical associations around the country.

Other Applications

Agiliti has spoken to other clients who want to build communities with school administrators, health care organizations and others. It will provide customers a low-cost model based on a monthly fee and be a value-added reseller of ASP services. It will offer Web publishing, email, and outsourced IT support, offering a total solution for Internet connectivity, Web hosting and IT needs to clients. Agiliti serves clients with a sustainable business relationship and instead of a project basis by providing as much support as a client requires.

Conclusion

The Internet’s evolution toward community always seemed inevitable, if only because its historical roots lie in connecting people with one another. Before most users had ever heard of the Internet, scientists used it to share data and applications, not to mention jokes and stories. The first non-scientific community on the Net, the San Francisco-based Well, is now more than 16 years old. In the next few years, thousands of WELL-style communities will sprout up, many based on professional interests, business ties, client relationships, passions, hobbies, schools and anything else which gathers together people for one purpose or another.

The move toward Application Service Providers (ASPs) seems as inevitable, too, but for different reasons. Software upgrades occur constantly now, making the option of renting software all the more attractive. The 97 or 98 versions of any software would be irrelevant because you, and your company, would always have the same, and latest, version of any program. ASPs also plan to rent Java applets, allowing users on any platform to have spreedsheet or word processing application they can share with anyone on any platform has a tremendous appeal for many business users. Image having a small spreadsheet applet on your laptop or Palm Pilot you can share with anyone instead of a huge program like Excel and you begin to understand the advantages of renting ASP applets.

ASPs, of course, are not the only ecommerce story. Eservices on the Web will continue to grow dramatically. The range of services offered via the Internet will continue to blossom. With these new opportunities on the horizon will come challenges such as who will be the quality gatekeeper for ASPs and e-services, how can communities be created in an organized fashion, how will the myriad of billing issues be solved. The question is who will provide the appropriate collection of services?

We believe Agiliti has the answer to all these needs. We can help clients create communities, aggregate and publish information, offer services and products through our digital dashboard interface and our DU servers. We can provide best-of-breed ASPs and e-services as well as offer the kind of high bandwidth Internet connectivity and support that will be required for a 24/7 Web-based business and community. We have the IT support, the understanding of telecommunications’ infrastructure and the ISP backbone to handle any size of community. We also have created advanced systems of billing and accounting which allow our customers to have a total overview of their procurement in the new ASP-e-service environment.

The Agiliti devotion to quality is, finally, a paramount concern. If a client experiences any kind of problem, our staff will immediately help solve it. The company’s head management — Thomas Kieffer and Mike Thomas — established well-deserved reputations in the Twin Cities for providing high quality service and high touch relationships to clients over the past two decades in their former positions. They have taken that enviable record with them to Agiliti, where they promote the same philosophy of quality, service and strong client relationships.

The Internet continues to be the most exciting sector of the U.S. economy. Agiliti has a staff with the background, skills and visionary leadership to provides clients the connectivity and the technology to take fullest advantage of the Internet. We welcome you to contact our staff and to try our products.