Patnayakuni, Ravi

Seth, Nainika

English

AIS Electronic Library (AISeL)

Association for Information SystemsAIS Electronic Library (AISeL)AMCIS 2001 Proceedings Americas Conference on Information Systems(AMCIS)December 2001Incorporating a Social Perspective to the Adoptionof Application Service Provider ModelRavi PatnayakuniTemple UniversityNainika SethSouthern Illinois University at CarbondaleFollow this and additional works at: http://aisel.aisnet.org/amcis2001This material is brought to you by the Americas Conference on Information Systems (AMCIS) at AIS Electronic Library (AISeL). It has been acceptedfor inclusion in AMCIS 2001 Proceedings by an authorized administrator of AIS Electronic Library (AISeL). For more information, please contactelibrary@aisnet.org.Recommended CitationPatnayakuni, Ravi and Seth, Nainika, "Incorporating a Social Perspective to the Adoption of Application Service Provider Model"(2001). AMCIS 2001 Proceedings. 356.http://aisel.aisnet.org/amcis2001/3561848 2001  Seventh Americas Conference on Information SystemsINCORPORATING A SOCIAL PERSPECTIVE TO THEADOPTION OF APPLICATION SERVICE PROVIDER MODELRavi PatnayakuniTemple Universityravi@temple.eduNainika SethSouthern Illinois University at CarbondaleNaina_seth@hotmail.comAbstractThe confluence of several developments in technology and trends in the  business environment has led to theemergence of new outsourcing model, the Application Service Provider (ASP).  Most practitioner studies focuson the financial and non-financial benefits of the ASP model. In this research, a different approach is taken.We highlight how adoption of ASP model is likely to be influenced by social perspectives outlined in theoutsourcing literature.Keywords:  ASP model, social perspectives in outsourcingIntroductionA new model for IT outsourcing services is emerging – the Application Service Provider Model (ASP).  Typically, the ASPremotely hosts and maintains a packaged application for its customers.  The customers do not have to license the application fromthe software vendor or upgrade it, thus resulting in large savings in total cost of ownership.  The ASP market is expected to growrapidly over the next three to five years. Depending on who is doing the predicting and how ASP services are defined theestimated growth rates vary from 80% compound (J. C. Bradford and Co. 2000) to 400% (Forrester Research 1997). Most managerial studies and case examples point to the benefits, both financial and otherwise, of the adoption of the ASP model.In doing so, they take a snapshot of the outsourcing decision at a given point in time.  However, in the ASP context, as in otherareas of traditional IS outsourcing, history and ongoing relationships influence adoption and use.  In this paper we draw uponsocial perspectives in outsourcing literature to present a model of ASP adoption and use over time. The Significance of the Social Context: The Application Service Provider ModelAn ASP manages and delivers application capabilities to multiple entities from a data center  across a wide area network (ASPindustry Consortium).  An ASP may provide a variety of outsourcing services including packaged software applications, datacenter services and network connectivity, application hosting, maintenance, upgrade and disaster recovery.  The  ASP servicesare part of broader IT outsourcing services.  However the social context of ASP adoption is different.  One difference is that theASP converts a software product into a software delivery service.  In moving from a product to a service it is the quality of theservice delivery process that needs to be optimized on a continuous basis as compared to the quality of the product that isoptimized at the time of production.  Hence factors such as network uptime; reliability and security are ongoing concerns in theASP context.  ASP sourcing, unlike conventional IS outsourcing, however is a one to many relationship.  Solutions in traditional IS outsourcing are customized for one client.  In the ASP model, packaged applications  either may notbe customized at all or may be customized to a limited extent or for vertical industry markets.  The social context of a one to manyrelationship is different from that of a one to one relationship.  Security breaches can have a much larger impact when the dataof multiple competitors is stored at the same site.  However lack of significant customization, systems integration or addition ofother value added services, can turn the relationship more towards an arms length market exchange.Patnayakuni & Seth/Adoption of Application Service Provider Models2001  Seventh Americas Conference on Information Systems 1849Social Exchange TheoryBenefits of the adoption of ASP model include, but are not limited to, lower  total cost of ownership, lower upfront investmentin software, scalability of applications over time, better IT expertise, state of the art technology and better accessibility (Bradford2000, Waineright 1999, Cherry Tree & Company 1999, Yu 2000).  Economic theories of outsourcing treat each sourcing decisionas independent (Richmond and Seidmann 1993). This may have limited relevance when organizations have to recurringtransactions with each other over a period of time (Nam et. al. 1996).The buyer and seller continuously adapt to each other over time.  The social exchange theory is used to analyze this adaptation.According to social exchange theory trust and power are mechanisms of adaptation (Blau 1964, Emerson 1962).  When trust existsbetween the buyer and the supplier they will continue to mutually adapt to each other. One party in the relationship is likely toadapt to the other if it is dependent on the other.  Dependence can be created by factors internal to the relationship such as productcomplexity, or factors external to the relationship such as market structure (Hallen et. al. 1991).ASP characteristics such as sponsors, reputation, ongoing relationship, market power, and capital investments would influencethe social exchange between the ASP and customer organizations.  It would also influence the level of trust between the partiesand the perceived risks in entering the relationship.  Based on social exchange theory it can be argued that:• The greater the level of trust between the ASP provider and the customer, the greater the probability of ASP adoption.• The greater the length of relationship between the ASP vendor and the customer, the more likely the customer is to use thevendor for hosting applications.• The greater the strength of sponsors, and size of capital investments and market power of the vendor, the more likely thecustomer is of using it for ASP hosting.• The greater the extent of value-added services offered by the ASP vendor, the greater the likelihood of continuation ofrelationship. • The greater the information exchange between the ASP vendor and the customer, the more the likelihood of continuation ofrelationship.• The more mission critical the hosted applications, the greater the likelihood of continuation of relationship.Conclusion and Directions for Future ResearchAs the ASP industry matures and more complex, mission critical applications are hosted, or more value-added services are addedto the ASP portfolio, the importance of social context in ASP adoption is likely to increase. The implications of social exchange theory for different types of applications and organizations in the ASP context need to befurther delineated.  The adoption of off-the-shelf packages from ISP’s by small to medium sized enterprises may not havesignificant implications for the adoption of ASP model.  However systems integrators and consultants who have different set ofsocial dynamics in their interaction with, for example, larger organizations also populate the ASP industry.  As the researchprogresses, a model of ASP adoption will be developed, and an empirical study conducted to validate the model.ReferencesASP Industry Consortium. www.aspindustry.org/faqs.cfmBakos, J.Y. and Brynjolfsson, E. (1993). “Information Technology, Incentives  and Optimal Number of Suppliers”, Journal ofManagement Information Systems, (10:2), fall, pp 37-53.Barney, J. (1991). “Firm Resources and Sustained Competitive Advantage”, Journal of Management, (17:1), pp 99-120.Blau, Peter M. (1964). Exchange and Power in Social Life . New York, John Wiley and Sons.Bradford, J. C. and Co. (2000). The Application Service Provider: The Net’s Next Killer Application,www.aspisland.com/trends/jcbradford/1.aspCherry Tree & Company (1999). www.cherrytree.com, IT Services and Spotlight Reports.Emerson, R. M. (1962). “Power Dependence Relations”, American Sociological Review, 27, February, pp 31-41.Forrester Research (1997). Packaged Applications Outsourcing, quoted in Futurelink: Building the Information Utility,www.futurelink.net, by Phil Wainewright, published by ASP News Review.IT Management1850 2001  Seventh Americas Conference on Information SystemsHallen, Lars, Johanson, Jan and Seyed-Mohamed, Nazeem (1991). “Interfirm Adaptation in Business Relationships”,  Journalof Marketing, April, pp 29-37.Nam, K., Rajagopalan, S., Raghav Rao, H., and Chaudhary, A. (1996). “A Two Level Investigation of Information SystemsOutsourcing”, Communications of the ACM, 39, 7, July, pp 36-44.Richmond, W.B. and Seidmann, A. (1993). “Software Development Outsourcing Contract Structure and Business Value”, Journalof Management Information Systems, 10, 1, summer, pp 57-72.Wainewright, Phil (1999). Futurelink: Building the Information Utility, www.futurelink.net ASP Case studies, May, publishedby ASP News Review.Yu, Marina (2000) The ASP Market is Growing Up, executive briefing, June 8 2000, www.mainspring.com/analysis

Incorporating a Social Perspective to the Adoption of Application Service Provider Model

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Incorporating a Social Perspective to the Adoption of Application Service Provider Model

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