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The ASP market has been shaky, to say the least. USinternetworkings bankruptcy filing is the latest in a string of bad news. But some large enterprise customers still have a lot of faith, both in the business model and in their application service providers. Ulrich Seif, senior VP and CIO of chipmaker National Semiconductor, recently told The Net Economy why his company continues to invest in outsourcing.
Q: Which ASPs does National use?
A: We use Qwest Cyber Solutions for SAP in our finance and human resources departments, Peregrine for EDI, ProBusiness Services for payroll, eTrade for our stock-purchase plan, Recruit Soft for staffing and human resources, and UPS for end-line packaging. QCS is our biggest ASP.
Q: So you are a big supporter of the concept of ASPs?
A: Overall, we arent afraid to approach ASPs. But we have very strict ground rules. For one thing, there have to be tangible numbers showing a return on investment within six months. We can hardly go to our CFO and say we are running applications outside of our four walls for no good reason. There is the perception of a loss of control. So another ground rule is that we have to understand our outsourced applications inside and out.
Q: So why dont you just handle those particular applications in-house?
A: We did at one time. But like all companies, we wanted to improve our service levels and reduce our costs. We had IT people that were not being challenged enough. SAP didnt keep them occupied on a full-time basis. They were sitting idle, and it was difficult for them to keep up on their skills for when we did need them. Why not let a specialist handle the applications? Thats their business.
Q: What other providers did you talk with, and why werent they chosen?
A: In March 2000 we began our adventure. We approached IBM, but they didnt want to talk. They said it would cost them too much to support us, and they wouldnt make enough money. The same was true at Perot Systems. We also talked with Corio. They had expertise in PeopleSoft, but not in SAP. It was not worth the risk to be their first implementation of SAP.
Q: What did you like about Qwest Cyber Solutions?
A: First is their proximity. They have a Cyber Center a quarter-mile from us. Also, with Qwests network-provisioning experience, it was so easy for them to put a DS3 connection in here. I think QCS has a broader offering than most ASPs, and they have the pipes to back that up.
Q: What do you pay for outsourcing, and what have the benefits been?
A: We cant disclose that figure. But I will say that we saw ROI within six weeks. We dont want to buy a lot of hardware and software. We just want to buy services.
Q: What are some of the problems you see with the ASP model?
A: In a lot of the failures, you have guys who just want to get rid of a headache. They dont understand their applications enough and just want them off their hands. But then who makes the calls? An outsourcer doesnt know your business like you do.
Q: How does National avoid those pitfalls?
A: Communication is very important. We have regular meetings with our providers. And we have someone on staff who manages the outsourcers. We know 100% how to bring an application back in house we need to.