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• About

How to Be a Smart ASP Buyer

Author : Charles Arsenault
President
Arsenault Associates, Inc.

Dear ASP Buyer:

Everyone agrees "ASP" stands for "Application Service Provider." But that's where consensus ends. There is no standard ASP service and no established model for service agreements. Even the term, ASP, means different things to different providers. In fact, the business community is still tinkering with the structure of ASP service level agreements.

What does an ASP do? Basically, an ASP rents software to you. You run this software over the Internet or dedicated phone lines from the ASP's location.

An ASP can save you time, effort and money. With some types of ASP services, you skip the costs of buying, installing and maintaining software and the computer hardware and networks to run it. You also avoid excessive downtime. Remote access to software at a professionally maintained site can be more reliable and headache free than the same software maintained on your own freestanding computers or networks.

Arsenault Associates, Inc. has been at work on both the technical and business aspects of delivering software as an ASP for a while now. That's why our 24/7 Fleet Online ASP product is the best in its class. You are welcome to run a free working "live demo" for yourself to get some hands-on experience with an ASP service at www.TruckFleet.com.

In the process of establishing that service, we have learned a lot on the business side that we share with you here. We hope this information will help you establish a successful relationship with an ASP so you can reap the benefits of this exciting, productive and enabling business service.

Charles Arsenault, President
Arsenault Associates, Inc.

THE ASP BUYER'S CHECKLIST

There are numerous types of ASPs. The two most common providing services directly to fleet customers are: dedicated service providers and open systems providers.

Most fleet maintenance industry ASPs currently offer dedicated services. In this ASP format, customers run their application software on computer hardware and software that is dedicated solely to the individual ASP customer. In many cases, the customer must provide or buy from the ASP the computers, operating systems, application software and communications system. The customer also provides a dedicated communication system such as T1 phone lines or high speed Internet access to their remotely managed application program.

The ASP installs, houses, manages and maintains your system at their facility. Typically, you pay up-front for hardware and software. You also commit to a long-term management service agreement.

In contrast, open system ASPs such as our 24/7 Fleet Online already have the computers, communications, hardware with operating systems and application software in place so there is nothing for you to buy or supply. This type of ASP offers the use of the systems on either a month-to-month subscription, like America Online, or you can negotiate a longer subscription term to get reduced fees. You normally pay a small initial set-up fee and the first month's subscription fee.

There are no boilerplate ASP service agreements so you may want some help negotiating a good agreement. However, limit your attorney's input and actions to items relating to protecting your core business. We have seen legal staffs suffocate otherwise good relationships between customers and ASP service providers by getting involved with technical issues. Ask your technical people about technical or service related topics, but beware that in some cases your IT department may feel threatened by an ASP service. Reassure them that their position and importance to you and the company has not changed.

With these basics in mind, what you need to negotiate in an ASP agreement is a detailed description of services to be provided and a clear statement and description of who is responsible for what. The written agreement should cover these details:

Subscription Term

• Be specific; include the beginning and ending dates covered by the agreement.
• Include a termination clause that allows you to cancel your subscription agreement. With a dedicated ASP service or a long-term subscription, expect a severe penalty to be involved. With an open ASP service and month-to-month subscription, generally you can expect to just walk away.

Payment Schedule

• Include a statement of the subscription fees with payment terms and conditions. Expect to pay in advance of the ASP service being provided.
• Most month-by-month ASP services are paid by credit card. However, you can negotiate a quarterly or semiannual payment if this is a better fit with your company's business model.
• If you don't pay by credit card, include a statement that provides a grace period prior to turning off the service if a payment is late for some reason.

Extra Fees

• Include details of any start-up, setup, or custom work involved and the fees charged by the ASP. You may need to pay for extras -- data conversion services, for example.
• Specify any ancillary products or services, such as user training, you expect the ASP to provide. Spell out the details of the products or services, including their costs, performance, and delivery schedules.

What You Must Supply

• Services or information you will provide may include user names, contact information, Internet connection services, and the like.
• Be sure to include a statement of any equipment you are to provide, such as minimum-expected hardware, communication systems or Internet access. Include the minimum-required access speed you are to supply.

Support & Help

• You will need a description of what customer support or help desk services the ASP will provide. Include response times, methods of providing help, and times available.
• Include in the agreement the assignment of a system coordinator- one of your trusted employees or managers-who will act as your single authoritative source for information and system services from the ASP. This will be the first person your staff comes to with their questions or problems.

Security

• Get a statement covering sole and exclusive access to your data, including unique company and individual user IDs and passwords, so nobody gets to see or use your information without your written consent.
• Include a guarantee of regular hardware, system and database maintenance, including security and safekeeping procedures. Detail items such as daily backup services with off-site storage and the way in which disaster recovery services will be performed.

Ownership

• Include a clear statement naming who owns the ASP service and what that service includes. Name who owns the data residing therein: you. In today's fast-paced business environment, you may want to add a clause about what happens if your company is sold or the ASP company is sold.
• Expect the ASP to impose some restrictions or limitations. Normally, you agree not to sub-license or transfer your ASP contract to anyone else without prior written permission.
• Include a warranty and indemnification statement saying the ASP has legal title to the software and other technology being used or has the authority to grant a license for its use, and holds you harmless for any ramifications of licensing problems.

Service Guarantees

• Include a guarantee that the ASP will keep software, computer hardware and operating systems current and under support agreements during the term of your subscription.
• Clearly state maximum system downtime allowed before the ASP can be penalized, what that penalty will be and how it will be provided to you. Expect exceptions here for routine maintenance and "acts of God." Generally, one percent (1%) downtime is acceptable.

For a dedicated ASP service...

• Get a description of the hardware, operating systems, application software and all the other items which you are supplying. This description should include makes, models, specifications and all serial numbers or licenses.
• Get a clear description of how your computer hardware and software will be returned, along with your database and all copies and backups, when the agreement ends.

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