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Investing in Alternative Solutions for Delivering Technology




Feb 7, 2001


Daniel Ben-Horin

I thought it might be germane here to share with you a real-time discussion we're having at CompuMentor on this very topic. This is the first time this has come up in a truly executable way, and as you can see our staff consultant is bullish on the advantages of a subscription-based computing model for this npo client. (I use ASP broadly to reference a broad range of outsourced IT services. The subscription-based model is essentially a super-ASP. The key business difference is that the subscription computing vendors make their money through leasing computers. So they are not really trying to create a new marketplace, like most ASPs, but instead extending an existing market by adding value to the customer's product.)

The discussion doesn't touch (yet) on the issue that has been raised in this listserv of training/supporting the client to be a 'successful' ASP customer, nor does it touch on the exposure to the market permutations of ASP life. My own impression is that both of these areas are central to pushing this functionality into the sector. One of the big hurdles for npos to cross vis--vis technology is the dissonance between the 'plug and play' hype that infests technology marketing vs. the reality. So many nonprofits have been told that 'technology will make your life easier' and have learned to their distress that in the short run technology makes your organizational life more stressful and that its payoffs are in better work, not in simplified work. But the upshot of this collective experience in the sector is that whenever a new functionality is oversold in terms of ease of use, people's BS detectors go on red alert. Much better to undersell on this level and have folks be pleasantly surprised by ease of use. Viz ASPs, I strongly feel that introduction of this functionality to the sector has to be bundled with *substantial* training and support.

As for market permutations, the further one is from owning technology (metaphorically speaking) the more intimidating is the prospect of being left stranded. And the fact is that ASPs are sprouting like mushrooms and dropping like flies. See:

>Defunct ASPs leave customers in the lurch
>December 07, 2000 10:30 AM PT
>Application service provider Red Gorilla is just one company in this >new and volatile industry to leave its clients confused and out in the cold after shutting its doors.

Here are excerpts from our internal discussion, with client and ASP names excised:

from Bob Xavier, one of our staff consultants:

>XXX's central office is looking to hire a part-time sys admin for their 6 computers. Tom and I both estimated 20K for them. I submitted their RFP to a list of consultants, of which zero have responded, and to YYY and ZZZ-- soup-to-nuts IT outsourcing shops. YYY came back with a hardware/softwares/helpdesk included rate of about 12,000 per year. I am going to recommend that XXX, with their aging infrastructure, accept this bid. It will also cut our helpdesk calls from them and put us back in the IT advising role.

After some give and take, Bob elaborated: YYY and ZZZ market turnkey LANs-- the PC, software, 100% of the support and problem resolution. The former of these focuses on small clients, while the latter on big clients. With YYY, their metric is essentially if you are too small to justify an IT person, then you will save money with their approach. They quoted $159 per month for XXX, per PC, inclusive of everything. ZZZ is more costly because their approach is to give you a wireless LAN. They focus on places that are big enough to have a full time IT person, and they replace that person.

For XXX, this will come to about $12,000 per year-- about $8,000 less than budgeted, just for a low level systems admin and his or her help desk. And CompuMentor continues to provide them with the CIO/Systems Consultant/Project Management role for their organization. The combination adds value to the services that we are offering, simply by freeing us from their printer questions.

Bob then added these thoughts re what he sees as the natural synergy between a t.a. org like CompuMentor and out-sourcers like YYY and ZZZ: If you think of what we do when we are consulting with clients, we add a lot of value, primarily at the infrastructure level and then as you get further and further into the line of business, our value-added diminishes. We have the capability to add value higher up the organizational mind, but not until the organization's infrastructure is stable and reliable. And we don't do that directly.

With the shortage of I/T help, and the randomness of most non-corporate I/T shops, I think this utility approach is excellent sense. The best thing we can do for people is convince them to take a realistic approach to I/T costs and systems management. A utility approach turns computing expense into another utility bill that is both predicable and that scales with the organization. And it invests the organization with a full service I/T shop instead of one part time person, with a hunch of what to do.

What is missing? The systems end of the business for the customer. Most often, this is going to be the fundraising operation and perhaps some other program specific database. If I understand TechSoup, we are attempting to add value further and further into the business model, but still with an I/T perspective. This seems like a very natural extension of that idea: commoditise the infrastructure and that expense, and then focus on the line of business.

For many of our clients, I expect the idea of reducing their I/T costs to a monthly utility bill would be frightening. Perhaps they are already struggling with the telephone and electric bills. But periodically, all of these people also face huge capital costs. It seems to me that the more we can pull people out of the routine of using duct tape and bubble gum to hold together their I/T infrastructure, the more we can be adding value to the real business of their work.

***Let me add in closing that we see a very logical role for TechSoup as a 'Consumer Reports' style evaluator of services in the ASP/outsourcing space (and also in the online giving derby). This seems to us a necessary next step to enable npos to look at the field with a sense of confidence, understand the range of options and develop a sense of empowerment in terms of making choices. Right now, even if an npo decided to explore the ASP waters, it would be hard pressed to figure out where to start, how to compare the apples, oranges and unidentified fruits out there, what standards to hold their provider accountable to and so forth. This dearth of decision-making tools is often a crippler of nonprofit initiative in areas where nonprofits typically have very little background or deep understanding.

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