Customers, vendors look to Microsoft for guidance on ASPs at HUG conference

October 18, 2000

Customers, vendors look to Microsoft for guidance on ASPs at HUG conferenceDoubts over data ownership and control may impede adoptionAnalysts are not shy with predictions that the application service provider (ASP) model will soon

Customers, vendors look to Microsoft for guidance on ASPs at HUG conference

Doubts over data ownership and control may impede adoption

Analysts are not shy with predictions that the application service provider (ASP) model will soon supersede old-economy business methods. Research firm IDC forecasts that the ASP market will reach $7.8 billion by 2004, even though ASPs logged only $500 million in revenue in 1999. This discrepancy has left many healthcare vendors asking, "How do we get there from here?"

One way is to look to the large platform providers such as Microsoft for guidance. As part of its Windows on Healthcare users group conference, held in Las Vegas this month, Microsoft devoted an entire track to ASPs. Presentations focused on economic models, case studies, and marketing and implementation challenges, and the consensus was that the pending HIPAA regulations offer a huge opportunity for companies marketing ASP-based products.

"Customers are going to look at functionality and features that meet the needs of their business process," said Buddy Gillespie, senior vice president and CIO of WellSpan Health, a large healthcare provider organization covering south central Pennsylvania and northern Maryland. "They want a vendor to support security like the HIPAA regulations, current and coming. Customers need to negotiate for what is coming down the pike."

However, the assumption of more responsibilities (security, support, and service) increases the risk for vendors providing a hosted product, according to John Kijewski, vice president of data center operations and application hosting for Siemens. Siemens/SMS has formed a partnership with Scheduling.com to provide enterprise scheduling applications on a hosted model. The firms have agreed to co-market the product.

The ASP guarantees a level of performance to the customer through a service level agreement (SLA). The SLA provides the blueprint for implementation guidelines, ASP performance, and customer expectations.

"When using the Internet to host mission critical apps, actual implementations generally use a mixture of dedicated leased lines and the Internet," Kijewski said. "These types of services need to be spelled out in the SLA."

Kijewski also cautioned against the hype surrounding ASPs, given that the hosting/outsourcing model is not new, noting that SMS has been hosting applications for more than 30 years. He referred to the Gartner Group hype cycle, which places the attitude toward ASPs at present squarely in the "trough of disillusionment."

Of course, firms hawking ASP-based products are counting on savings to open the eyes of cost-conscious healthcare clients. Presenters at the HUG conference hit hard on the financial benefits of ASPs, which include no need for upfront capital investment, predictable monthly costs, and freedom from software upgrade expenditures.

"Healthcare end users are facing challenges," said Laura Peters, business development manager for FutureLink, a healthcare ASP in Irvine, CA, that counts Microsoft and Compaq among its investors. "In addition to a shortage of IT employees and decreasing operating and capital IT budgets, CIOs have to justify IT investment with return on investment."

Compared to Gartner Group estimates of $9477 per desktop per year for a PC-based LAN and $6675 per desktop per year for server-based computing, FutureLink claims an average cost of $3600 per desktop per year for its ASP products. The firm offers an SLA with availability of 99.9% and an average cost per user of $85 per month.

According to Laura Perkins, vice president of Ultimate Software, any ASP proposal has to address both hard and soft costs. Winning over a customer depends not only on the ability of the ASP to provide clear and tangible benefits but also on quick implementation time and ease of use.

"Vendors need to leverage technology's ability to deliver solutions to customers that reduce hardware, software, and maintenance costs," she said. "Aside from costs, the major advantage in ASP is back-end data integration through XML."

But who owns the data? According to Linus Diedling, vice president of professional services for Healthvision, the ownership of patient data is a particularly thorny issue for payers, providers, and physicians alike. Throw the increasingly Internet-empowered patient into the mix, and conflicts are likely to escalate. Ultimately, Diedling said, an ASP's primary responsibility is to keep the data safe.

"The Internet provides possibilities, but it also raises a lot of concerns," he said. "Patients want in on the information exchange, and physicians are being pressured by informed patients."

ASP vendors also need to have an exit strategy, Diedling said. Because healthcare customers are traditionally conservative buyers, vendors need to provide them with a plan for getting the data out of the ASP offering, and they must be ready to address questions upfront regarding switching back to a nonhosted application.

Microsoft sees its role in the healthcare as threefold, said Bob McDowell, vice president of Enterprise Business Relations. First, the Redmond, WA, firm will provide the electronic healthcare framework based on its dot-Net initiative; second, the firm will provide an integrated healthcare portal; and last, it will provide a digital healthcare community.

"The impact of the Internet as a new distribution medium has enabled ASP‹that is, the idea of software as service," he said. "We're throwing the Microsoft business model up in the air to compete. We will rebuild our products within two years and repackage them as services." However, pricing remains a serious challenge, according to McDowell.

Showing its support for the ASP model, the platform vendor intends to launch its best known application suite, Office, as a browser-based service. But the reconfiguration will take some time, according to Anmar Alani, director of Microsoft's ASP Web Services.

"Microsoft is behind browser-based computing, and we are moving Office to the browser," he said. "We will be launching tools in the next few months that will enable applications to be ported to the Web, and we are behind the XML and SOAP (simple object access protocol) standards. But there are limits to a Web browser solution."

According to Alani, time-to-market is a significant issue in moving products over to a services model. The richness of an existing application or suite of programs may force developers to go with Citrix metaframes in order to port to a Web environment, whereas a totally new application can be coded to run natively on the Internet.

Microsoft is also launching an ASP certification program and expects to have the preliminary certification process complete before year's end. Through the certification process, Microsoft hopes to establish the standard of quality for ASP services‹and increase its share of the market in the process.

Part of Microsoft's strategy in developing an ASP model for healthcare has been to look beyond the traditional medical market, according to David Lubinski of Microsoft MCS Healthcare Practice. For example, the firm compares the seasonality experienced in the floral industry to the needs generated by open enrollment for insurance benefits.

"ASPs allow for the effect of seasonal promos or for fluctuating demand," he said. "Customers can expand their configurations to accommodate surges and then reduce the amount of services as needed."

Microsoft's investment in other information delivery modes, such as PDAs and smart cards, was echoed on the show floor as well as in the sessions. Pocket PC products were well represented throughout the HUG conference, and exhibitors included ParkStone Medical, Data Critical, AllScripts, and iScribe.

"PCs will play a part in the future, but not the only part," said Paul Smolke, healthcare business development manager for Microsoft. "dot-Net is about providing information on any device‹PCs, TVs, phones, handhelds, appliances."