Stopping a Wild Ride

Inforonics woos small, midsize enterprises via predictive pricing.

IT service provider Inforonics Inc. hopes to squeeze into a new niche between big custom application outsourcers such as Accenture Ltd. and packaged application service providers such as USInternetworking Inc. with a new predictive pricing model for its Paragon4 custom application management services.

The pricing model, which draws on Inforonics experience in developing and managing custom applications as well as an actuarial model based on historical data, is intended to bring outsourced management of custom applications to small and midsize enterprises.

Such enterprises typically cant afford large application outsourcers such as Accenture or IBM Global Services, nor can they budget for the wide swings in monthly fees that accompany outsourced day-to-day management of their custom applications, according to officials at Inforonics, in Littleton, Mass.

"For custom applications, pricing is like a roller coaster. You can spend 10 times more in one month than another. But you need to be able to set aside money for managing those applications," said company spokesman Jeff Kosiorek.

"From a maintenance perspective, one of the problems Ive had is that you have no idea what its going to cost you. Their approach was tailored so it addressed our maintenance needs, but theyve done it in a way that lets me forecast my budget. I dont have to worry about [unpredictable pricing]. It takes a large burden off me," said an early customer, Tom Gardner, director of IT at Boston Capital Corp., a real estate investment company in Boston.

Boston Capital chose to outsource day-to-day management and maintenance of its Web applications, which are used most heavily by investors but also by developers and partners. Although those applications contain a lot of confidential information, Gardner, who acted as the catalyst for the outsourcing decision, had no misgivings about turning over control to Inforonics.

"Trust isnt a concern. Weve had a solid relationship with them. We are also structured so that they have a central person responsible for our applications on their side, and we have someone specified on our side," said Gardner.

Boston Capital could have gone with a number of better-known application management providers whose names carry greater weight—such as Electronic Data Systems Corp., IGS or Accenture. But those service providers are not focused on custom application management, according to Jessica Goepfert, an analyst at International Data Corp., in Framingham, Mass.

"The growth area is around packaged applications. They are rallying around the packaged applications opportunity," Goepfert said.

Still, today, only 17 percent of the application management opportunity is around packaged applications, while 83 percent is around managing custom applications, according to IDC estimates.

Boston Capitals Gardner turned to outsourcers in general because he knew what to look for. He turned to Inforonics specifically because he believes it provides a greater cost advantage and because of its strong focus on managed services, he said.

"Theyve honed into a managed services organization. They have a lot of infrastructure and expertise to support that compared to others Ive looked at that want to do it all. With others, you get less focus that inevitably costs you in the end," Gardner said.

Gardner said he estimates that Inforonics has reduced Boston Capitals application management costs by nearly 40 percent.

The Paragon4 service comprises four elements that can be sold together as a service or split into individual services, depending on a customers requirements. The elements include a discovery phase in which Inforonics identifies the applications to be managed and determines their characteristics, including who is using the applications and how they are being used.

The second element is planning. "Its where we plan for the events that affect the application through its life cycle," said Inforonics Kosiorek. Such events include transitions to new platforms or management as a result of mergers or acquisitions. They can also include enhancements and maintenance plans.

The third element is certification, under which Inforonics develops detailed documentation and runs an application through its own quality assurance testing to look for problems and recommendations on how to fix such problems. Certification helps customers better understand applications to ease future enhancements and trouble-shooting.

The fourth element is remote application maintenance. Inforonics is flexible in providing day-to-day management of customer applications. It can host applications, remotely access a customers applications on-site or manage applications at a third-party hosting facility.

In taking on the day-to-day management of Boston Capitals applications, Inforonics provides three types of support in a tiered pricing structure.

Under case-based maintenance, Boston Capital has a specific number of cases allotted per month. Inforonics must deal with such cases within a "couple of hours," said Gardner. If the company exceeds that number of cases, it pays a nominal fee. Boston Capital also pays a flat fee for break/fix work, which is unlimited. The fee is determined using historic data and Inforonics actuarial model. The third type of support is database administrator work for a flat fee.