Trending back to the service bureau model
Shared document services provides fast implementation & scalability -- without capital cost
The mainstream computing services marketplace has validated a trend in the document management segment -- a move toward shared application services. Several companies have broken into the shared document services market using a service bureau model. ACS, ImageX, Cylex Systems and LanVision offer customers the capability of using their centralized computing resources. In the enterprise reporting (COLD) market, Lason, First Data Resources, Anacomp and PSI offer page-based report distribution on a service bureau "shared" basis over the Internet. That seemed quite risky to naysayers, yet now there is evidence that it is a significant, rapidly growing trend among not only leaders in the KM/DM segment, but in the computing industry at large.
ImageX released its Electronic Vault Personal Edition earlier this year and already has, for example, users at three locations at American Airlines; 10,000 users at Earle M. Jorgensen, the largest steel distributor in the world; and users at Riverside County Courts. For under $30 a month, users can sign up for ImageX's service and scan up to 5,000 documents locally, which are uploaded to ImageX's servers. A key advantage is that documents can be accessed remotely.
Cylex Systems takes a different approach. Instead of a flat monthly fee for a specified number of documents, it charges according to the number of documents stored, and there is no access charge for retrievals.
In the healthcare arena, LanVision started offering Virtual Healthware Services. The pricing structure consists of an initial setup and installation fee, a fee per document input into the system (whether scanned, interfaced or imported), a retrieval fee and an online storage fee per gigabyte per year. LanVision can set up a Virtual Private Network (VPN), which is as secure as a private network.
For several years, FileNet software has been offered by ACS on a service bureau basis. Hosting several servers at its center in Dallas, ACS offers imaging, document management and workflow services using shared resources.
Enterprise report management -- an evolving services strategy
Approximately 60 developers of COLD/enterprise reporting systems active worldwide are targeting computer page output production applications. Those developers sell turnkey systems to users, which means that the user pays a one-time charge for the hardware and software that comprise a computer document system.
Many organizations have discovered that enterprise report management is easily cost-justified based on savings in consumables and labor. Frequently, however, decisions are not made because of fear of the technology and the capital expenditure. As a result, a number of companies are beginning to offer a "service bureau" concept, which is similar to that of the early timesharing computer service bureaus and the computer output microfilm service bureaus. The basic concept is that of an "object" server that resides at the service bureau location and delivers electronic computer output documents to Windows clients and Internet browsers -- the "rentable application." The new service bureaus offer pricing based on document volumes. There is no technology cost or development time.
Representative of the service bureau concept are established companies such as Anacomp (COFI -- Computer Output for the Internet), Lason (Visions), First Data Resources (Digital Internet Services) and PSI (DXR -- Digital Express Reports). It is no coincidence that those companies have their origin in the service market. They are experienced in the timely delivery of documents and have a heritage that dictates a commitment to building the infrastructure necessary for success.
The output service vendors have implemented a wide variety of applications:
- Anacomp has successfully installed systems for report delivery to internal users. One such intranet installation, Helix Healthcare, has installed the system for electronically delivering 250,000 monthly general ledger and payroll reports to 2,000 users at hospitals for which they perform data processing.
- PSI has focused on the brokerage market and has more than 45,000 investment advisers, brokers and broker-dealer customer service representatives accessing historical statements and trade confirmation documents over the Internet.
- Lason has developed Internet systems for the delivery of internal reports to the automotive and healthcare markets and has implemented both Internet browser viewing as well as IBM 3270 terminal access to a central server in Michigan. One customer, NASCO, a healthcare claims processing organization, accesses both Explanation of Benefit and image check output in support of nationwide claims processing and customer service.
- First Data Resources has been providing CD report output services to more than 750 banks and now offers credit card statement and report services using its recently introduced Internet site in Omaha.
The systems provide document-specific indexing -- the key to fast access to documents, a client-server architecture to reduce network traffic by distributing only the document that is requested, and exact replica viewing and reprinting of statements, which facilitates customer service.
What's the value?
The business case for using a service company for report output distribution and history are based on the mission-critical reasons for deploying information through the Internet. They include:
- faster implementation times -- The service provider will set up the application and eliminate the in-house development time as well as the associated personnel time.
- scalability is assured -- As the application volumes grow, the service provider can scale the server to meet demand, with no additional technology investment or development time.
- no purchase (RFP) process or capital cost -- The vendor can be selected with minimum effort in the analysis process. There is no major technology risk. The decision can easily be revoked if service levels deteriorate.
- transition to additional Internet applications -- The distribution of legacy reports can be expanded to include other document types without major software development time.
Enterprise reporting on the Internet is quietly becoming a mainstream application. The concept of fast implementation through outsourcing the development of those critical information applications is another option that is available to enterprise IT decision-makers.
The mainstream does it too
Further validation comes from mainstream computing providers like IBM Global Solutions, MCI Systemhouse and a fast-growing spinoff of Andersen Consulting, ServiceNet. Other rapidly growing upstarts include USInternetworking and Interliant in the application service provider or rentable applications market space.
The business rationale is sound, the service levels guaranteed through agreements with onerous penalty clauses, and network bandwidth capacity is roughly tripling every year. The cost per incremental user is held constant or it declines with rentable applications used on a shared basis. If an in-house system is purchased that can support 1,200 users, the cost per user is not optimized until the system is at full capacity. And then what happens when user 1,201 is needed? A new server, with all its peripherals and software licenses is required, substantially raising the average cost per user. With shared, rentable applications, users can be added as needed at a prenegotiated price and with greater speed. That gives the organization more flexibility in responding to user needs as well as constancy and predictability of expenses.
When a user organization requires a change to its core applications due to a merger, for example, the in-house model falls short. The user organization is generally stuck with a software license for five years, and the unloading/reloading of application software can cause a major upheaval. In the rentable model, an accounting system that is accessed through a browser can be switched out by the rentable application service provider and new (often prenegotiated) licensure agreements are put in place. In effect, the rentable application service provider does not lose a customer; it simply offers a different application service to meet the customer's demand.
ServiceNet, the Andersen unit, offers popular mainstream applications on a rented or leased basis. Those with proven demand, such as Oracle financials, Lawson accounting, SAP and Baan are offered to automate financial operations. Siebel is provided to automate the sales process. Infrastructure products such as Lotus Notes and Oracle's Relational Database Management System are also available.
ServiceNet is presently negotiating to offer document management and workflow software to complement its product set. That should put on notice DM and workflow providers without a strategy for offering shared services. The top layer will be true KM product offerings. Perhaps some people believe that it is not a bona fide trend. The proof, though, is in the numbers: ServiceNet did approximately $2 million in revenue last year, will do nearly $40 million this year, and projects well over $100 million in 1999.
"In the 1960s and 1970s, processing power in terms of MIPS and DASD storage were very expensive, but today, those two components are relatively cheap," said ServiceNet CEO John Whiteside. "Now organizations are more focused on rapid response to the dynamic business environment, and a globalizing economy. Now they want to do three key things: implement quickly, implement globally and make changes to their organizational structure quickly, while not worrying about IT infrastructure and the specific technologies required to meet their business demands. That's what we offer them."
And with more than 50,000 users online already, the argument seems to be hitting home.
The competition for netsourced services providers like ServiceNet is primarily the turnkey market offerings of major integrators such as EDS and Perot, IT vendors like IBM Global Solutions and network carriers like MCI Systemhouse attempting to climb out of the "pipes" business. Other new companies such as Interliant and USInternetworking are positioned much more like ServiceNet than more established mainstream companies.
USInternetworking
In an essay, "IT Trends Favor Business-Critical Packaged Application Outsourcing," John Liccione, VP of research and development, said, "The trend in corporate Web site outsourcing began in 1996 when companies realized two things: One, they didn't have the internal IT expertise or people-bandwidth to do a world-class job of it, and two, it didn't matter where on the network the server was physically located."
Liccione continued, "It makes sense for companies whose core competency is not IT to outsource complex transaction-based E-commerce Web sites to service providers with high-quality data centers offering fat pipes to the Internet. Not many companies can justify the cost of building and operating their own data center with raised floor, UPS/generator backup power, redundant, high-speed Internet access and a 7/24 operational staff on site. Outsourcing complex mission-critical Web sites for business-to-consumer and business-to-business E-commerce has become fairly commonplace.
"Now, think of a company's most critical internal applications -- those for the front and back office, such as human resources, accounting, sales force automation and enterprise resource planning (ERP). Traditionally, implementation of those kinds of packaged applications from companies like PeopleSoft and Siebel are handled by corporate MIS departments with on-site consulting by a system integrator. The capital outlay for a typical packaged application solution can easily run into the $1 million to $2 million range just to procure and implement, and on top of that is the staffing, operational and maintenance expense. It is a tough pill to swallow, especially for midsize corporations with conservative MIS annual capital budgets."
The evolution of application software to support a three-tier architecture, increased bandwidth capacity and the maturation of VPNs, extreme competition for IT personnel resources, the velocity of the business cycle and continued globalization of business have contributed to a strong trend back toward a service bureau model of computing. So with all those changes, it seems there is nothing new in the world.