ASP-hosted Technology–Trend or Fad’

By Loren Parsons | March 11, 2002

Many vendors now offer agency management systems via ASP (Application Service Provider). The ASP model moves the agency database and management system software from the agency to a data center, and agency personnel access the system through the Internet. As a result, agents can effectively outsource the majority of the technical automation work that would otherwise be performed in their agencies.

Vendors provide ASP products in one of two ways. Some have their own data centers, staffed with employees experienced with that vendor’s products. Others choose to outsource the data center functions. There are good reasons for both approaches.

At AMS Services, we subscribe to the first approach. To date, more than 600 independent agencies have contracted with the company for one of our ASP products. What we have learned from the experiences of those agencies—nearly all of which have been positive— could suggest the beginning of the trend of most agencies moving to ASP services during this decade.

However, not everyone shares the opinion ASP is a long-term trend for agencies. Some pundits challenge the notion that ASP is anything more than a fad. Some of the issues raised by challengers can be addressed as follows:

“Agents view their customer database as their most valuable asset. Most agencies will not allow their databases to be moved away from the agency.”

In the early days of ASP-hosted management systems, some agent/clients were adamant that under no circumstances would they allow their databases to be housed in a data center. This objection has not completely disappeared.

It is not unlike the difference between keeping money in a wall safe or keeping it in a bank. Just as the bank has a bigger, tougher and more secure safe, most ASPs have a bigger, tougher and more secure facility for housing agency data. A vendor that services a large number of agencies can afford to employ such things as “industrial strength” server clusters, Storage Area Networks, jumbo UPS equipment, multiple backup generators for use during sustained power outages and expert technicians. Agencies that use an ASP are also exempted from the thorny problems that arise when the agency system coordinator is out sick, away on vacation or turns in a resignation.

“ASP technology creates an ugly support headache. When a problem occurs, the agency will have to be the go-between for the software vendor, the data center, and the Internet Service Provider (ISP).

Reports from nearly all our ASP customers indicate that system problems are fewer and generally resolved much more quickly in the ASP than had been the case with in-house systems.

That said, local communication issues within an ISP are possible and beyond our control. It is recommended that agents have a backup Internet dial-up connection available. While slow for regular work in an emergency, it allows an agency to continue working when there are hiccups with the ISP.

“ASP-hosted systems are not as secure as an in-house management system.”

Most ASPs have invested heavily in making this not so. When comparing ASPs, an agent shouldn’t be afraid to ask for credentials verifying their security. For example, the TruSecure Perimeter Certification reflects the successful completion of an extensive information security audit validating risk management efforts of a vendor for its Internet-based services.

Customers can be confident that mission-critical e-business systems, networks, applications and physical environments offer an increased level of security over the traditional in-house system. Other designations, like TruSecure, are also available.

“Only small agencies will buy ASP systems. Large agencies will continue to use locally installed systems.”

Although this was initially a commonly held position, a number of larger agencies are committing to ASP-based management systems. Such agencies usually have multiple locations that imply expensive communications hardware, leased circuits and administrative overhead. Using an ASP, each location connects to the Internet and, in turn, to the agency management system. The ASP solution almost always results in lower connectivity costs and reduced administrative effort for multilocation agencies. Regardless of the number of locations, ASP allows agency personnel to access the agency database at work, from home, from a customer’s office or even from a hotel room.

Of course, ASP is not for everybody—or at least, not yet. Many agencies enjoy success with locally installed systems and have developed laudable IT expertise for dealing with their systems. And while ASP solutions require minimal initial investment, the monthly fees are higher in that vendors add hardware, services and technical personnel to the equation. Some agents find the higher fees objectionable, but many agencies are finding that their total automation costs are actually lower when viewed over a period of years.

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Insurance Journal West March 11, 2002
March 11, 2002
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