Just Ask

[From iSource Business, February 2001] Q: "Are ASP providers compliant with licensing terms; and what happens to your business if they're not?"

A: It's Simple: Find Out


It's been written that the height of paranoia is when you go to a football game and think the guys in the huddle are talking about you. That's how many purchasing professionals feel when they are choosing an ASP. The decision process starts with these questions: Do I want to hire and maintain an information tech department (the old DP)? Do I want to spend $100,000 or more to buy and then implement an ERP system the big applications that actually run the business? Or, do I want to partner with an ASP?

ASPs buy the software or have proprietary software, implement it, maintain it and "partition it" so each client has their own "instance" and can enable users to access the application as they would if they had purchased and installed the software.

There are basically two types of ASPs: software designers and implementers, such as the Oracles of the world; and the consulting companies that either have developed or purchase the software to meet your needs, such as the KPMGs of the world. Both have the ability to assist in the development of an ERP System. When the latter is chosen, shopping for the right ASP involves determining whether or not their model is a good fit for an organization. This investigation must include licensing issues. For example, reviewing contacts with the software companies from whom the software was purchased. This procedure is no different than how any standard service contract would be reviewed. Many ASPs are software companies using their own software. Most, if not all, software companies have "default" clauses that protect their clients. These clauses protect against the bankruptcy of the software company or ASP by providing physical copies of the software to an escrow agent which would revert to the clients, and they should be included as a standard part of the ASP client contract.

Prospective users need to review (by their legal and risk management departments) all contracts and agreements that will be executedwith the ASP, as well as the licensing agreements with the company from which the ASP licensed the software. It's important to remember software is not sold, it's "licensed" perpetually and with annual "support and maintenance" agreements and fees (for problem resolution and new releases). The license always specifies that any and all users of the software are governed by the terms and conditions of that license. The users and the clients of the ASP, are also subject to the same terms and conditions, unless different terms and conditions are specified.

To summarize, selecting the right ASP involves a careful decision-making process. This process will require you to evaluate all contracts and agreements and go deeper into your investigation. Ask your ASP for copies of their agreements with their software provider. Once you've carefully reviewed that, then you can sign the bottom line. And don't worry about the guys in the huddle. They aren't talking about you they're talking about the person next to you.

Abner (Abby) Greene is director of purchasing for Consolidated Engineering Services Inc. in Arlington, Va.

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