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98 Chapter 2 • The Business Case The next step is to develop a solid understanding of another significant asset, your existing customers. It is important to leverage every advantage available when entering a new market segment, and existing customers are an excellent differentiator when entering the ASP segment. Important information to track on customers includes industries, employee count/growth, revenue/revenue growth, locations with employee count, and expansion plans. As you gain an understanding for the demographics of your user base, you will be able to make some assumptions about the potential near-term revenue streams of various categories or applications. As potential categories and applications emerge, it is very important to accumulate information on the short- and long- term opportunity for that offering. While it is important to determine quantifiable information such as potential market size, it is just as important to qualify the willingness of the market to pur- chase the offering.The ideal offering will fall at the end of the early adopter phase and the beginning of the early majority growth period. Next, it is important to evaluate the opportunity by comparing the cost to bring such a service or services to market with your qualified and quantified projections on the services potential. As you determine the categories for which your company is best suited, it is important to begin accumulating information on the various ISVs within that segment. It is important to rank these potential partners on factors such as: ■ Market penetration ■ Innovation ■ Financial viability ■ ASP strategy ■ Application capabilities It is also important to find an ISV that shares your vision and is willing to develop a mutually beneficial relationship.The best partners will share a commit- ment with your organization and develop a revenue-sharing model. ISPs should leverage their existing brand, track record, and customer base in ISV negotiations, as they are significant differentiators and should allow better terms to be negotiated. As with any partnership, confidence in the ability to work amicably with the people across the table from you over a long period of time should be held in high regard. Intangibles are a major component of successful partnerships. When assessing an application to offer as a hosted service, it is important to clearly understand the potential market for that application. It is infinitely valuable www.syngress.com 130_ASP_02 6/19/01 2:43 PM Page 98 The Business Case • Chapter 2 99 to uncover problems facing businesses or a specific vertical and bring a solution to market that addresses those issues. It is particularly advantageous to do so when similar options are not available or not cost effective for that specific market segment. ERP and CRM applica- tions are excellent examples of applications that address existing business prob- lems, but are price prohibitive for many small to medium businesses. The opportunity to purchase such applications at an acceptable price will only be available to these businesses in a hosted environment. Due to the effi- ciencies enabled by such packages, the ASP providers of these products will have an excellent value proposition.There are also financial advantages to bringing specialized applications to market initially. It is easier to develop expertise when focused on a more specialized applica- tion. In some instances, this strategy requires that you limit the number of applica- tions offered or focus solely on solutions for one vertical market segment. By doing so, your company will be better able to cultivate market-leading expertise. It can then leverage that expertise to steadily reduce the cost of adding each cus- tomer. Document management is such a service for many of these vertical markets. Companies can leverage their understanding of their application and a spe- cific market segment to truly understand the needs of their potential customers. The ideal application in this instance would have the capability to be ported to other industries as the company’s capabilities grow. It is important to remember that your offering must continue to evolve and expand, or it will ultimately suc- cumb to the pressure of commoditization. Customer Issues As with any industry in their early stages, the addressing of the needs of potential and existing customers is going to be an important critical success factor for the ASP industry.As we discussed previously, choosing the correct offerings and bundling them in a way that is valuable will be critical. It is imperative that ASPs develop an understanding of the decision criteria used by potential customers and the most important criteria used to judge service levels by existing customers. Successful providers will have to focus on these issues to improve their market penetration and customer retention. Customer-satisfaction levels and reputation will be important success factors in the ASP segment. Current Analysis published the results of their survey of ASP customers that ranked the major decision criteria they used to choose an ASP provider. Major factors included: www.syngress.com 130_ASP_02 6/19/01 2:43 PM Page 99 100 Chapter 2 • The Business Case ■ Support Capabilites ■ Hosting and Facility Experience ■ Cost and Pricing Structure ■ Reputation and Client Reference ■ Service Level Agreement ■ Past Performance ■ Scalability and Completeness of Solution In order to successfully market to potential customers, it will be important to address these issues. ISPs should be at an advantage because of their existing support capabilities, track record, and reputation. It would be advisable to develop reference accounts from within the existing customer base in the initial stages of the ASP rollout. A successful value proposition will have to incorporate these criteria and should be supported by marketing materials focusing on the same issues. Many of the same issues will remain a factor for customers after they have signed on.While customer satisfaction is always an important statistic, it is even more important in a developing industry. In order for providers of hosted appli- cations to succeed, they will have to prove that the technology is ready for primetime. One of the most persuasive ways to prove that fact is with high cus- tomer satisfaction.The main components of long-term customer satisfaction should include four main factors: ■ Support Customer support will be a very important component of every successful ASP offering. Much of the ASP value proposition is based on the reduction of internal IT requirements.To achieve that goal, the provider must assume the responsibility for those services. ASPs must be prepared to manage the system end to end. They will be confronted with application issues, network issues, and desktop issues. This means a broad spectrum of support services must be offered on a 24 x 7 basis. In some instances, the ASP will be required to work with the ISV to troubleshoot application failures and issues. ISPs have a significant advantage over other providers because they control and manage the network.This allows them to control the end- to-end offering. Successful ASPs will understand that their offering is truly a service, and strive to differentiate their services based on the sup- port they provided around that service. It should not be overlooked that www.syngress.com 130_ASP_02 6/19/01 2:43 PM Page 100 The Business Case • Chapter 2 101 the number-one issue in the current analysis survey was support capabil- ities. Do not expect that ranking to change. ■ Performance Performance is a major issue facing ASPs. Users are demanding performance on par with internal implementations. In many instances, they are expecting better performance than they would receive from an internal application across a WAN link. Some ASPs have tried to address these issues with thin client solutions or direct connections. In this instance, the strong pricing pressure on bandwidth is an advantage. Many customers are simply failing to invest in their own infrastructures. Link speeds and LAN implementations are too slow for the increasing demands being placed on them.As 10/100/1000-megabit WAN connections become widely available and are adopted by busi- nesses, many of these problems will disappear. Software applications are helping ASPs gain an understanding of user issues and determine the exact cause. Mercury Interactive (www.mercuryinteractive.com) is one such company whose products allow sessions to be tracked from end to end. Statistics and information are gathered from the server through the network to the user’s desktop. Problems can even be determined and reported within the service provider cloud.Tools such as these are extremely effective for docu- menting the source of user issues and proving the provider’s innocence when problems exist within the customer’s network. ■ Pricing Customers are looking for pricing models that are reasonable and predictable.While pricing methods in the industry do vary, most providers charge an upfront integration and installation fee, and then bill services on a flat monthly per-user charge. Some ASPs are offering bundled pricing that does not require an upfront charge but spreads the cost over higher monthly fees. In specific instances such as e-commerce hosting,ASPs have offered risk/revenue- sharing arrangements. It is unclear what the long-term pricing model will look like, but it is obvious that pricing will remain an issue. Customers will look for a solid and measurable return on investment (ROI) for ASP implementa- tions.Those offering ASP services will have to struggle with the balance between customization and pricing. An efficient balance that allows cost advantages over traditional implementations while addressing the general needs of most potential customers will be required. www.syngress.com 130_ASP_02 6/19/01 2:43 PM Page 101 102 Chapter 2 • The Business Case ■ Security Security will remain a major concern for all businesses, and will increasingly become a residential issue. Companies hesitate to allow outside connections into their network.They will also fight the migra- tion of their mission-critical information to the data centers of others without clearly defined security practices. More importantly, ASPs cannot afford a security breach of their customers’ data. Such an event would likely receive media attention and destroy the future of that provider, as well as impact the industry as a whole. Strong measures must also be in place to stop traffic from one cus- tomer from gaining access to other customer’s connections. In the most severe instance, an experienced hacker could gain access to the ASP net- work through one customer’s link and then infiltrate the networks of all of your customers. Security measures will have to be taken to address the concerns of potential customers as well as potential threats to the viability of the ASP model. www.syngress.com 130_ASP_02 6/19/01 2:43 PM Page 102 The Business Case • Chapter 2 103 Summary ISPs must quickly come to understand that Internet is no longer the most impor- tant word in Internet service provider—service is. ISPs must bring services to market that combat the financial realities their current offerings are facing.They must efficiently deploy and market impact services that drive profitable revenue, attract customers, and retain existing customers; services that offer customers improved capabilities, increased efficiency, and definable financial savings.The ser- vices must address real problems and demonstrate value for the end user. Services that seem to be ready to handle these demands are voice over IP (VoIP), unified messaging, managed global VPNs, and application hosting, among others. It is our belief that application hosting provides the greatest opportunity for ISPs to address the market issues facing them. ASP services can be used to address issues as diverse as commoditization of existing offerings, pricing pressure, cus- tomer churn, market valuations, and access to capital. ASP offerings also have two other important advantages; they are based on proven technology and provide a highly persuasive value proposition to potential customers. The ASP model offers companies services and capabilities that would not oth- erwise be available to them.The ability to deploy productivity-enhancing services quickly will prove to be a requirement for most businesses.The scalability and agility inherent in the ASP model will also be required by enterprises and fast- growing companies to support remote offices, users, and corporate partners. It is our belief that the capability to rapidly deploy and scale applications will drive the growth of ASP services in all sectors at the expense of traditional methods. As ISPs roll out ASP services, they must carefully address the main concerns and demands of potential customers: support, performance, pricing, and security. All of these issues must be addressed in a successful ASP strategy.Addressing these issues should be the foundation of your offerings, as the success of your company and the widespread acceptance of the industry will likely depend on your han- dling of these issues.The solutions to these concerns should be addressed in your marketing message and value proposition; they will drive customer acceptance and satisfaction. As all true entrepreneurs know, the greatest opportunities come when the view of the future is at best, unclear.Traditionally, it has been times such as these when the brave and innovative have reaped the greatest rewards. www.syngress.com 130_ASP_02 6/19/01 2:43 PM Page 103 104 Chapter 2 • The Business Case Solutions Fast Track ISP Market Conditions ; Internet access reached 50-percent market penetration in less than eight years of existence.The growth rate in the United States is projected to be anywhere from 40 to 110 percent for at least the next few years. ; According to Boardwatch Magazine, there are currently more than 7700 ISPs (early 2001) that are doing business in the United States alone. ; The reality of the DSL market is that providers must rely on the Incumbent Local Exchange Carrier (ILEC) for the all-important con- nection to the customer.That forces ISPs into the position of com- modity resellers in direct competition with their suppliers. ; While broadband connections seem to be following the same economic pattern as their slower counterparts, their significance should not be over- looked. Increasing broadband access speeds will be the foundation for the value-added services that will allow ISPs to differentiate their offerings. Service Provider Business Requirements ; In order to break out of the current cycle, many service providers and ISPs in particular will have to address these factors: commoditized offering, significant pricing pressure, high customer churn, drastically reduced valuations, restricted access to capital. ; The current demands of the financial community once again include traditional terms such as differentiation, barriers to entry, and profitability.The easy money is gone. The Evolving ISP ; The evolving ISP must overcome the issues that are facing its core business, the demands of its customers, and the demands of the investor community. ; Among the first required steps to migrate to value-added offerings is to develop a highly reliable service model. www.syngress.com 130_ASP_02 6/19/01 2:43 PM Page 104 The Business Case • Chapter 2 105 ; Current implementations of hosted applications and Web sites are accessed across existing connections, sometimes with significant delay, but saturated links and latency will not be tolerated in the future. The Service Provider of the Future ; ISPs must ask themselves what type of services they will need to have available in two, three, and five years in order to remain competitive and profitable. ; Businesses and consumers will not purchase services from a provider that cannot include all required data, voice, and entertainment offerings. Over the next few years, providers who have not embraced new offerings and developed methods for continuously developing new offerings will not be facing commoditization, but extinction. The Case for Application Service Provider Conversion ; The ASP offering is a revolutionary response to the inefficiencies in our current distributed computing environment. ; Application hosting presents enormous potential for ISPs. It addresses many of the market realities that are currently plaguing the segment. Application hosting provides the opportunity to differentiate Internet connections and create additional high-margin revenue streams. ; International Data Corporation (IDC) placed worldwide ASP spending at $300 million for 1999 and estimated spending of $7.8 billion by 2003 based on 92-percent compound annual growth. Many other companies have projected much higher figures. Critical Success Factors ; Application infrastructure provider (AIP) is a term used to describe a provider that offers ASPs wholesale network and data center services. www.syngress.com 130_ASP_02 6/19/01 2:43 PM Page 105 106 Chapter 2 • The Business Case ; Leveraging channel partners with complementary offerings can be very effective, but these channels must be managed differently from direct sales methods. ; Current Analysis published the results of their survey of ASP customers that ranked the major decision criteria they used to choose an ASP provider. Major factors included support, expertise, price, and reputation. Q: What resources are available for those interested in the ASP model? A: A variety of industry groups have sprung up over the past year. Information can be found at these Web sites among others: www.atlentis.com, www.aspisland.com, www.itaa.org, www.aspnews.com, www.aspindustry.org, www.aspwire.com. Q: What applications should we choose? A: Choosing applications is one of the most critical events in your migration strategy. It is important to assess the current skill sets of your organization, your existing client base, and a number of ISVs.The best applications will leverage existing talents and knowledge. It is also important to offer applications that are attractive to your existing customer base. Finally, it is highly desirable to form a strong partnership with the ISV that produced the application. Q: How will we market and sell our product? A: This is one of the most urgent questions facing the ASP industry. Start by leveraging your existing sales organization. In general, services should be mar- keted to existing customers first, because they have an existing buying rela- tionship with your company.Various sales models and reseller channel relationships are possible.Your organization will have to develop a customized www.syngress.com Frequently Asked Questions The following Frequently Asked Questions, answered by the authors of this book, are designed to both measure your understanding of the concepts presented in this chapter and to assist you with real-life implementation of these concepts. To have your questions about this chapter answered by the author, browse to www.syngress.com/solutions and click on the “Ask the Author” form. 130_ASP_02 6/19/01 2:43 PM Page 106 The Business Case • Chapter 2 107 strategy specifically for your suite of offerings. As you successfully add addi- tional services to your offerings, it is imperative that you transition your sales strategy to focus on the services instead of the connectivity. Q: How can we determine if we are ready to add ASP services? A: It is our belief that two main long-term strategies exist for ISPs: become the low-cost producer and compete on price, or add a variety of additional ser- vices to fend off commoditization. Historically, these have been the only potential strategies for companies in a market segment facing commoditiza- tion. Only a few competitors will be able to transition to become low-cost producers, and they will likely be among the largest players in the market. The chance of succeeding with additional services is far higher, and we believe ASP services to be an excellent solution. www.syngress.com 130_ASP_02 6/19/01 2:43 PM Page 107 [...]... channel 3/ 1-4 on Port(s) 3/ 1-4 are assigned to admin group 52 Port(s) 3/ 1-4 channel mode set to on Console> (enable) show port channel Continued www.syngress.com 127 130 _ASP_ 03 128 6/19/01 2:44 PM Page 128 Chapter 3 • Server Level Considerations Figure 3. 6 Continued Port Status Channel Mode Admin Ch Group Id 3/ 1 connected on 52 835 3/ 2 connected on 52 835 3/ 3 connected on 52 835 3/ 4 connected... 835 3/ 2 connected on 52 835 3/ 3 connected on 52 835 3/ 4 connected on 52 835 - Port Device-ID Port-ID Platform 3/ 1 090 031 611(6500) 3/ 1 WS-C6500 3/ 2 090 031 611(6500) 3/ 2 WS-C6500 3/ 3 090 031 611(6500) 3/ 3 WS-C6500 3/ 4 090 031 611(6500) 3/ 4 WS-C6500 - Console> (enable) exit In Figure 3. 6, the Admin group was automatically assigned.This provides an identifier... Table 3. 1 for a breakdown of each SCSI technology www.syngress.com 130 _ASP_ 03 6/19/01 2:44 PM Page 117 Server Level Considerations • Chapter 3 Table 3. 1 SCSI Technologies SCSI Technology Maximum Throughput (Mbps) Maximum Number of Devices Maximum Cable Length (Meters) SCSI-1 SCSI-2 Fast SCSI-2 Wide SCSI-2 Fast Wide SCSI-2 Ultra SCSI -3 (8 bit) Ultra SCSI -3 (16 bit) Ultra-2 SCSI Wide Ultra-2 SCSI Ultra -3. .. group Figure 3. 7 shows how to manually configure an Admin group for a second EtherChannel grouping Figure 3. 7 Manually Configuring and Verifying an Admin Group Console> (enable) set port channel 3/ 5-6 99 Port(s) 3/ 5-6 are assigned to admin group 99 Console> (enable) show channel group 99 Continued www.syngress.com 130 _ASP_ 03 6/19/01 2:44 PM Page 129 Server Level Considerations • Chapter 3 Figure 3. 7 Continued... 130 _ASP_ 02 6/19/01 2: 43 PM Page 108 130 _ASP_ 03 6/19/01 2:44 PM Page 109 Chapter 3 Server Level Considerations Solutions in this chapter: s Implementation, Where to Begin s Software Solutions for Your ASP s Application Software Types s Network Service Considerations s Data Backups and How They Can Affect... www.syngress.com 131 130 _ASP_ 03 132 6/19/01 2:44 PM Page 132 Chapter 3 • Server Level Considerations server that is connected to two or more separate LANs.This is usually done to help segregate traffic, and increase the usable bandwidth on a particular network It is also possible to enforce multiple sets of access lists on each network, which can help to increase security See Figure 3. 10 for an example... operational.This is usually only a matter of seconds, but could increase significantly if STP is enabled on the associated switch port STP is usually www.syngress.com 129 130 _ASP_ 03 130 6/19/01 2:44 PM Page 130 Chapter 3 • Server Level Considerations Figure 3. 8 Server Connected Using Adapter Fault Tolerance Primary, k active lin Switch Secondary , inactive li nk Link is broken until primary link fails Switch enabled... Figure 3. 4) Figure 3. 4 Link Aggregation Using Multiple Switches Total aggregate bandwidth = 400 Mbps (half duplex) bps Switch M 100 100 Mbps Switch 100 Mbps 100 Mbps Switch Switch www.syngress.com 130 _ASP_ 03 6/19/01 2:44 PM Page 125 Server Level Considerations • Chapter 3 Configuring & Implementing… Link Aggregation Standardization A link aggregation task force has been formed to launch the IEEE 802.3ad... a single adapter is used, so the effective downstream bandwidth is still only 100 or 1000 Mbps depending on the adapter As an example see Figure 3. 5 www.syngress.com 125 130 _ASP_ 03 126 6/19/01 2:44 PM Page 126 Chapter 3 • Server Level Considerations Figure 3. 5 Intel Adaptive Load Balancing Transmit bandwidth = 200 Mbps Receive bandwidth = 100 Mbps 100 Mbps maximum 100 Mbps maximum Transmit 100 Mbps... data.Table 3. 2 displays some of the characteristics of different Ethernet technologies Table 3. 2 Ethernet Technologies and Characteristics Technology Speed (Mbps) 10Base5 10Base2 10BaseFL 10BaseT 10 10 10 10 Physical Media 50-ohm thick coax 50-ohm thin coax Fiber optic Category 3 unshielded twisted pair Maximum Cable Length (Meters) 500 185 2,000 100 Continued www.syngress.com 130 _ASP_ 03 6/19/01 2:44 . services is far higher, and we believe ASP services to be an excellent solution. www.syngress.com 130 _ASP_ 02 6/19/01 2: 43 PM Page 107 130 _ASP_ 02 6/19/01 2: 43 PM Page 108 Server Level Considerations Solutions. can vary. See Table 3. 1 for a break- down of each SCSI technology. www.syngress.com 130 _ASP_ 03 6/19/01 2:44 PM Page 116 Server Level Considerations • Chapter 3 117 Table 3. 1 SCSI Technologies Maximum. SCSI-2 10 to 20 8 3 Wide SCSI-2 20 16 3 Fast Wide SCSI-2 20 16 3 Ultra SCSI -3 (8 bit) 20 8 1.5 Ultra SCSI -3 (16 bit) 40 16 1.5 Ultra-2 SCSI 40 8 12 Wide Ultra-2 SCSI 80 16 12 Ultra -3 SCSI 160 16