Improved integration, centralized databases, access through Web browsers and application service providers (ASPs) are some of the current trends impacting on organizational decisions regarding IS/IT outsourcing. Web-based technology liberated the client/server IT model from the limits of geographical boundaries delimited by a local area network. Partnering with the right ASPs could provide organizations with the new synergy required for competitive advantage. The development of a “solutions” innovation business model of rental-based sourcing, charters current ASPs and the differences in IS/IT provision and offers an audit of the benefits and costs of ASPs to businesses and other stakeholders. Future challenges are mapped out for consideration as are strategic choices associated with continued outsourcing, as distinct from in-sourcing, of IS/IT.



Organizations now often establish shared services within their firm as an alternative to outsourcing. Shared Services are the convergence and streamlining of an organization's functions to ensure that they deliver the organization the services required of them as effectively and efficiently as possible. Rather than having a department (e.g. human resources) devolved over a number of offices, a shared service is the centralizing and convergence of these. This often involves the centralizing of back office functions such as HR and Finance but can also be applied to the middle or front offices. A key advantage of this convergence is that it enables the appreciation of economies of scale within the function and can enable multi function working (e.g. linking HR and Finance together, where there is the potential to create synergies). A large scale cultural and process transformation is often a key component of a move to shared services. This transformation often results in a better quality of work life for employees.

Application Service Providers (ASP) have much to offer companies in today's connected, competitive world. They level the playing field, allowing small and medium-sized companies "to leap frog to Tier 1 applications". And multinational companies doing business globally benefit from the easy connectivity of the ASP solution.

ASPs companies deliver application functionality and associated services across a network to multiple customers using a pay as you go model.

Because ASP solutions are what they calls "apps in a box," they lend themselves to rapid deployment. Little or no customization is required. That's one reason why ASPs are popular with dotcom companies eager to introduce their products to the world.

There are no up front capital costs because the buyer does not need to purchase hardware or assemble a staff. Many find the concept of renting versus buying attractive. The on- going costs are lower, too, since the supplier can amortize its costs across many customers. Pricing becomes predictable and simple.

Using an ASP also makes sense in a business environment where mergers and acquisitions are rampant. Switching costs can be lower.

ASP applications also "tend to get optimized" because the providers use templates by industry. This allows all users to take advantages of best practices.

ASPs also address the IT skill shortage. High staff turnover and escalating salaries are creating stiff competition for the talented few. Outsourcing providers are more qualified to attract the best and brightest. Staffing becomes the outsourcer's problem.