Three Approaches Companies Use for On-Demand Computing

Below is an annotated glossary to three types of on-demand computing models:

ASP An application service provider, handles the deployment of a typically noncritical IT function because the CIO doesn’t want the overhead of owning it. Integration and compatibility issues are no different than for internally deployed software. Any cost savings are usually due to the ASP’s use of cheaper labor offshore, not to a fundamental efficiency advantage conferred by the ASP strategy itself.

Examples: Oracle On-Demand ERP software, Workday HR software and any Web host.

BPO A business process outsourcer, handles an entire process for you, such as sending out paychecks or getting credit scores, and it makes sense when how the vendor delivers the function doesn’t matter to the CIO; it’s the result that you’re buying.

Examples: ADP payroll, Accel medical transcription and claims processing, and Fair Isaac credit scoring services.

MSP A management service provider handles a set of services on behalf of a company. These can be IT services (such as e-mail security and management), business services (such as dealing with telecom expenses) or both (such as managing a call center). Unlike with a BPO, with an MSP the CIO may care what technologies are in place, as what the MSP handles may interact with the CIO’s other IT systems and certainly with the enterprise’s processes. MSPs typically make sense for processes that require intensive oversight because of frequent change (such as virus blocking and telecom expense management) that the enterprise is not good at handling.

Examples: ScanSafe virus detection, Vercuity telecom expense management and Echopass call-center operation services. In some cases, MSPs offer customers a choice of self-management (through a SaaS offering) and vendor management (through an MSP offering).