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Value creation from IS Integration: From ASP to Web Services?. Wendy.L.Currie Warwick Business School Presentation at ESRC Seminar – Nottingham University Business School, UK June 2004. Overview. EPSRC and ESRC Funded Research Project 2000-2004 The ASP market - A Flawed e-business model?

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Value creation from IS Integration: From ASP to Web Services?

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Value creation from is integration from asp to web services

Value creation from IS Integration: From ASP to Web Services?


Warwick Business School

Presentation at

ESRC Seminar – Nottingham University Business School, UK

June 2004



  • EPSRC and ESRC Funded Research Project 2000-2004

  • The ASP market - A Flawed e-business model?

  • Web Services - Integration: The Missing Link?

  • Case Study – Implementing A Compliance System in the Financial Services Sector

Research studies

Research studies

  • £193,000 from EPSRC: ‘Assessing the deployment, hosting and integration of business-critical information systems by application service providers’ (BC-ASP). October 01-September 03.

  • £258,000 (plus £195,000 to Fullard Learning Ltd and Ltd) from ESRC: ‘Developing a risk-assessment framework for deploying, hosting and integrating vertical and horizontal information systems by application service providers’ (ASP-VH). March 02-February 04.

Asp definition

ASP Definition

“An ASP manages and delivers application capabilities to multiple entities from data centres across a wide area network (WAN)”.

ASP Industry Consortium

Value creation from is integration from asp to web services

Ecosystem For Hosted Applications

Early predictions asp market

Early predictions – ASP Market

$24 Billion by 2005

IDC, 2001

$18 Billion by 2005

Gartner Group, 2001

$23 Billion by 2003

Forrester, 2000

$22.7 Billion by 2003

DataQuest, 2000

$19.2 Billion by 2003

Yankee Group, 2000

Spending on asps

Spending on ASPs

  • IDC says companies spent roughly $245 million on application service provider (ASP) services in 2001

  • Manufacturers spent $221 million on ASP services in 2001

  • But 60% of ASPs predicted not to survive! (Gartner Group)

Key drivers of the asp industry

Key Drivers of the ASP Industry


  • Adopt a ‘Utility model’

  • Software provided as a

  • service

  • Focus on core competencies

  • Reduce total cost of

  • ownership (TCO)

  • Better value proposition

  • Agility and flexibility


  • Global competition

  • New business (e.g. ERP vendors)

  • Faster time to market

  • De-regulation, consolidation, standardisation

  • Global IT skill shortage


  • Access to technical expertise

  • Information delivered through internet and corporate intranets

  • Global access to information

  • Parallel to converged networks

  • Standardised solutions

  • Net-centric applications

A comparison of traditional and application outsourcing

Traditional Outsourcing

Application Outsourcing

Software licence owned by the customer

Software licence owned by the vendor

One to one relationship between vendor and customer

One to many relationship between vendor and customers

Legacy software application paid for by customer

No up-front costs to customer

Price based upon s/w license and maintenance

Price based upon usage

Software as a product

Software as a service

S/W application located at customer site

S/W application located at supplier site

A comparison of traditional and application outsourcing

Asp and integration

ASP and Integration

  • Integration of applications across multiple platforms, sites and environments

  • Business process re-design through integration

  • To create a ‘seamless’ IT organisation

  • Integration of billing information into auditing and reporting systems

  • To create an infrastructure for better manageability

  • To achieve faster software application implementation

  • Resultant synergy from combination of applications

Scale scope and integration definitions

Scale, Scope and Integration - Definitions

  • Scale– the extent to which a firm enters into outsourcing contracts in relation to vendor capabilities

  • Scope– the extent to which it is possible to source specific activities, tasks, processes or applications from a third party vendor

  • Integration– the extent to which software applications can be integrated across business processes

Scale scope and integration of outsourcing the key challenge

Scale, Scope and Integration of Outsourcing: the key challenge

Projected Market

Pure-Play ASP

(, Netledger)


Full Service Providers (FSPs)



Actual Market

Enterprise ASP,

(J.D.Edwards, SAP, Corio, Aristasoft)



Examples of flawed asp business models

Examples of Flawed ASP business models

  • Enterprise ASPs – Difficult to sell ‘vanilla ERP’ to SMBs (example – JD.Edwards)

  • Vertical ASPs – Customisation and integration/not one-to-many (Aristasoft)

  • Pure-play ASPs – No profits from commodity software applications (email) (E-Carisma)

  • Infrastructure ASPs – Over-capacity of network/datacentres, no channel to market (Cable & Wireless)

The first phase asp market a false start

The first-phase ASP market – a false start

  • One-to-many became same-for-all

  • No profits from commodity software applications (email, MS office, etc)

  • ASPs focused too much on marketing – not on revenue generation

  • SMBs were unconvinced about the benefits of the ASP model

  • ASPs failed to ‘create value’ for customers

  • Technology platforms/software not web-centric

Asp and web services

ASP and Web Services

  • Convergence between telecommunications and computing industries will continue

  • Market consolidation of ASP vendors

  • Web services will facilitate BPO

  • Value creation through customization and integration

  • ASP vendors need to develop business models which address scale, scope and integration

Asp and web services1

Commodity ASP


One-to-many – point solution

24x7 availability

High scalability

Economies of Scale

Efficiency (of business applications)

Individual performance improvement

Utility pricing models

Packaged ‘Stand-alone’ applications

Functional data/information

Application integration

Remote C/V relationship

Application outsourcing

Service Level Agreement (SLA)


Continuous improvement

Inter-departmental change

Technology peripheral to core business

Silo effect

Web Services


Many-to-many - Enterprise-wide

24x7 availability

Unlimited Scalability

Economies of Scale and Scope

Adaptiveness (to business change)

Enterprise-wide improvement

Multiple, fluctuating pricing models

Component based applications

Business Intelligence

Synergy of combination of applications

Loosely-coupled C/V relationship

Business process outsourcing

Multiple SLAs


Changing Industry/market dynamics

Industry-wide change

Mixed technology portfolio

Synergistic (more than the sum of the parts)

ASP and Web Services

Web services definition

Web Services Definition

‘Web Services are loosely coupled software components delivered over Internet standard technologies. A Web Service represents a business function or business service and can be accessed by another application…over public networks using generally available protocols..’ (IDC, 2001).

Value creation from is integration from asp to web services





  • Experimentation with Web Services with small, internal integration projects

  • SOAP-enablement of legacy applications and ERP, CRM systems

  • Fast cycles of learning reach the limits of early Web services, unprepared IT architectures

  • Increase in shared information across the business

  • Experimentation with WS outside firewalls

  • Increasing interaction with trading partners and customers

  • Close trading partners implement Web services to drive shared value

  • External trading partners begin sharing information to drive industry value chain benefits

  • Lessons from integration and collaboration applied to new processes and business models

  • New distributed WS processes and applications drive business change

  • Dramatic business results are achieved as WS are applied in many ways, driving new value propositions

  • First movers begin to assert their dominance over respective markets and industries

  • Industry dominance achieved by innovating new business models as well as out-executing competitors

  • Web services leaders win through rapid innovation and cycles of learning

  • Web services mastery creates new company and industry structures as boundaries are redefined

Phases of Web Services Adoption

Stage 1

Stage 2

Stage 3

Stage 4

Source: Marks and Werrell, 2003

Value creation from is integration from asp to web services


Firm A

Firm B

Existing system

Four different systems that could not connect with each other

Excel spread sheets and paper based deal tickets


Part of a group that employed 22,000. The 120 users managed corporate pension plans, private clients and wealthy individual investors. Twelve dealers.

Thirty employees, the four fund managers also dealt their own trades.


Windows NT, LAN and WAN. All Oracle and SQLServer database systems in US

Windows XP. SQLServer database

In-house skills

Expert DBA, network teams, 24hr help desk, in-house training

No expert IT skills

Implementation Team

Over 20 at its peak (1 external)

2 core people (both external)

Compliance Rules

Over 25,000

Over 350

Accounts and Positions

15,000 accounts: 250,000 positions

25 accounts, 2,500 positions

Securities Traded

Debt (10%)

Equity (60%)

Unit Trusts (10%)

Money Market (10%)

Foreign Exchange (10%)

Debt (60%)

Derivative (35%)

Equity (5%)

Time to implement

3 years

6 months

Value creation from is integration from asp to web services

The flow of information within Firm A and B

Value creation from is integration from asp to web services

Value Added Web Services





Windows Messaging

Web Services


Internet and Intranet

Web Reports




  • Market driven towards using Web services for straight through processing

  • From One to Many (ASP) to Many to Many (Web Services)

  • Speed of Integration improved with standardisation of interfaces (XML)

  • Increased liquidity (i.e. allows more buyers/sellers to trade simultaneously)

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