As a content development and delivery operation, the Net has gotten big enough to support a large variety of finely differentiated, highly specialized services.
In this Special Report, eWeek looks at the cost-reduction and quality-improvement opportunities created by proliferating service provider practices—exotic and mundane—and examines the management challenges involved in making the most of these varied offerings.
Expanding Yellow Pages
Expanding Yellow Pages
In alphabetic order, a useful taxonomy of “xSPs” might run from the BSP (business service provider) to the SSP (security service provider). (We welcome nominations for ASP, or for TSP through ZSP, that are not themselves just umbrella labels once removed.)
Stripped of hype, the BSP is just the traditional service bureau, handling payroll, benefits, corporate credit card and expense reporting, and other traditional back-office functions. These tasks might as well have their overhead shared across a base of several companies because theres little competitive advantage to be gained in this domain.
Whats new is the delivery of these services via Web technologies, leveraging common standards to reduce administrative and technical support costs. When business services of this kind are delivered via the Web, the buyer should apply all the usual filters to those who come bidding for the business—references, performance guarantees and so on—plus additional criteria that prevent this tail from wagging the enterprise dog.
Plain-vanilla business service access should not put undue restrictions on client hardware, server architecture and the like; the convenience of the service providers development team should not dictate the clients IT road map.
CSP is a popular TLA (three-letter abbreviation), with at least two translations that ought to be on the shopping lists of most enterprise IT buyers: Commerce service providers, already handling secure credit card payments and other present-day e-business chores, offer the attractive future prospect of streamlining nationwide sales tax collections. When shopping for this kind of CSP, buyers should anticipate such complications in the commerce service environment (which will perhaps be further hampered by anti-terrorist measures to track activity in any number of newly sensitive commodities). Buyers should choose a service provider with resources to meet such demands.
Content service providers, another sort of CSP, help the enterprise portal operator attract and retain an audience by offering fresh and relevant information—shown by research to be the most important attribute of a successful Web presence—without creating a costly internal online publishing house. Many in-house pilot projects founder upon the discovery that content maintenance is an ongoing cost; using a content service provider gives operators the benefit of high-productivity site maintenance tools, with predictable budgets and without the burden of training in-house staff.
The MSP (management service provider) aids IT staff in the tiresome but necessary chore of asset tracking, a growing burden as portable and handheld devices become a larger fraction of the IT hardware base. Software license compliance, update management to assure IT client security and hardware loss prevention are all areas in which these providers can often pay their way. Key factors in selecting this kind of MSP are the ability to work with a variety of asset tracking technologies and readiness to integrate with a customers established reporting procedures.
Security Is a Service
Security Is a Service Driver
Crucial to any discussion of service providers is the SSP. A late- September report from International Data Corp. forecasts $2.2 billion in SSP sales to financial companies alone by 2005—up from $848 million last year and accounting for roughly 10 percent of an SSP market that IDC predicts will grow during the same period from $6.7 billion to $21 billion.
The IDC figures, despite their focus on financial-sector buyers, imply that nonfinancial companies will boost their SSP spending by roughly one-third—compounded—over each of the next four years.
This rapid growth represents a combination of trends.
First, smaller companies are increasing their presence on the Net and especially their reliance on advanced technologies such as broadband. This creates new problems, such as exposure to a wider range of Internet attacks, as well as new opportunities. Its not practical for a small company to hire in-house specialists in an area so exotic, so vital and so volatile as Internet security.
Second, the pervasive adoption of the Net elevates customers expectations (backed up by a growing list of government regulations) for the integrity of a companys e-business presence. Purchased services, sometimes with their own recognized brand names in areas such as bill presentment and processing, provide customer assurance while outsourcing business and technical risk.
Security is merely one of the most visible areas in which many pressures combine to strengthen the hand of service providers. In general, as doing business on the Net ceases to be a novelty, customers will quickly come to expect a uniformly high level of professionalism and performance in all functions related to e-business. Anything less than industry-leading performance will soon be unacceptable, and purchased services will soon be the most economic way to deliver the kind of performance that customers demand.
xSPs (Web Services)
Exploring the use of service providers is not the same thing as making a bleeding-edge commitment to the technology of Web services, as exemplified by Microsoft Corp.s .Net framework and by other offerings from IBM and Sun Microsystems Inc.
Web service technologies are still largely unsupported by all but prerelease versions of application development tools. (Borland Software Corp.s Delphi is a notable exception, with its high- level aids for encapsulating and abstracting the complexities of XML-based data exchange and service invocation.)
A mid-October report from Gartner Inc. predicts that Web services will increase enterprise application development efficiency 30 percent by 2005. However, Gartner recommends only pilot projects during the coming year, with initial focus on migrating internal development efforts to the Web service model of dynamic connection between distributed processes.
Financial services companies will be the first to adopt Web service technologies for intercompany operations, the Gartner report predicts, because these companies already have an infrastructure of authentication and reputation networks that can readily be translated to emerging Web service protocols.
It would be a mistake to wait for the Web service technology environment to settle down before exploring xSP options, in the same way that it would have been a mistake for a retailer to wait for the emergence of toll-free telephone numbers and e-mail before getting into catalog sales.
Yes, Web service technologies will expand the variety and efficiency of xSP offerings, but the one is not the precursor to the other.
Civilizing the Frontier
Civilizing the Frontier
Doing business on a frontier demands a high degree of self-sufficiency. At one time or another, merchants have created their own currency; companies have built and maintained their own roads; mining operations have constructed and owned entire towns.
The Internet is ready to move beyond such frontier economics to become a place where people can do business without having to do it all themselves—where even a tightly focused service provider can find enough of a clientele to make it a viable concern.
A thriving ecology of service providers reduces the barriers to entry for everyone else who wants to sell on the Net. The more service a company can buy, instead of performing for itself, the more that company can focus on doing what it does best.
This principle is at least as old as Adam Smiths 1776 essay on the economics of mass-producing pins. The questions are how and when, not whether or not the service providers will become the true infrastructure of e-markets.
Technology Editor Peter Coffee can be reached at [email protected]