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Investing in Alternative Solutions for Delivering Technology

Post:

06

Date:

Feb 2, 2001

From:

Jonathan Peizer


Ironically, the ASP model may work better for NGO's then it does for commercial entities. Commercial ASPs are having problems finding viable business models. They don't have the benefits that NGO ASPs have:

1) Lower overhead in the form of tax relief.

2) The ability to negotiate discounted or subsidized arrangement from 24/7 hosting shops that do nothing but guarantee network reliability.

3) A strategy that can live with a break-even plan as opposed to making 15-30% returns for VC's that would invest in it.

4) Design of applications in open source allowing NGO's to license, and even customize them for their own non-commercial use if they wish to opt out of an ASP arrangement. This would be almost impossible to do with a commercial entity that would most probably regard its ASP application as proprietary.

5) Tech personnel that may be subsidized because it's cheaper and easier for funders to get their minds around subsidizing a group of tech personnel in one place serving many organizations than funding tech personnel in a thousand places serving the same organizations. Commercial entities too, might be willing to provide personnel for limited volunteer or sabbatical assignments to help support an ASP endeavor.

The biggest downside for NGO ASPs is still finding appropriate, expensive, tech resources and being able to support the technologies. Any ASP effort still requires some full time staff - and the appropriate support and training personnel that go along with managing an ASP.

If an IT provider NGO (like NPower, which guarantees technical excellence, an understanding of the NGO market and appropriate training) developed an ASP model, that combination would represent a pretty powerful alliance. In fact NPower has just such a plan.

On the NGO side, the ASP arrangement is also beneficial even with the real downsides Mario mentions. At the least, the ASP route is no worse than issues NGO's currently deal with. Many NGO's are trapped by technical projects that go wrong whether they be an ASP or an in-house arrangement. The problem is that either way they have few extra resources to expend on trying something new in mid-stream. Commercial entities by contrast can make the reinvestment more easily. With the ASP solution upfront development costs are much less for an NGO than developing in-house and that provides more breathing room if an NGO must change projects in mid-stream. If an NGO approaches an ASP like it would a service bureau offering, it should probably be contracting with the same issues of reliability, integrity, security, privacy and exit strategies in mind.

RGDS

JP

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