Application Service Providers: The Next Horizon in Software

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As more and more people turn to the Web for everyday activities, nonprofits are looking for ways to use the Internet to serve supporter, client and member needs. One type of Internet company could make a difference: Application Service Providers (ASPs), companies that offer state-of-the-art online software tools for “rent.” ASPs develop and rent specialized software tools that are accessible via the Internet. Virtually every major type of expensive software is now available via an ASP. Nonprofits of all sizes can now take advantage of high-end software without some of the hassles involved when purchasing and housing software on their own computers. It’s a revolution that could literally level the technology playing field for nonprofits.

Using an ASP is similar to using voice-mail supplied by the telephone company for use in a home or business. The voice-mail technology itself does not exist in your home or office, but is located at the phone company’s offices. You, as the customer, simply pay the phone company a monthly bill to “rent” its technology. Just as renting voice-mail capability allows the consumer to avoid buying, maintaining and replacing an answering machine, subscribing to an ASP allows a nonprofit organization to avoid purchasing, installing, supporting and upgrading expensive software applications.

Suppose your nonprofit wants to sell tickets to its fifth anniversary awards dinner on its Web site. You’d like the capability to collect credit card payments for dinner tickets, plus keep track of people’s names and addresses, and also offer an opportunity for additional financial support. To do so, your organization would need not only an e-commerce system so attendees could submit credit card payments online, but also an online database to manage the sales transactions and fulfillment process. Your organization could use an ASP for all of these needs. It would mean that the credit card information and database as well as the software to run the systems would reside on the ASP’s Web server, as would the technical support burden. It would also mean that when your staff needs to run reports on dinner ticket transactions, instead of logging onto a database that resided on a computer in your office, they would connect to the ASP over the Internet. None of this would be visible to the end user: to the ticket buyer, it would appear as if everything was located on your organization’s Web site.

The strongest appeal of an ASP today is that nonprofits can add powerful and mission-critical services quickly and inexpensively to their Web sites, without having to purchase, install, support and manage complex hardware and software. The “rental price” that nonprofits pay to the ASP frees the nonprofit from having to contend with the technology itself. An Internet company owns and operates the technology and takes responsibility for software development, upgrades, hardware reliability, backups, and customer service. Using their experience, ASPs can handle security, backup, disaster recovery, and technical support. With primary technology maintenance being handled by the ASP, the nonprofit is free to concentrate on its own mission and programmatic goals. Most importantly, ASPs allow nonprofits to access a range of new, higher-end Web applications and tools.

ASPs’ pay-as-you-go pricing makes access to specialized software more affordable for smaller nonprofit organizations that will simply never be able to afford the upfront capital investment. Using an ASP offers an opportunity for scalability, allowing organizations to purchase additional capacity as their needs grow. ASPs provide convenience and flexibility, allowing staff to access systems from multiple locations, including outside the office.

Whether buying software out of the box or going with an ASP, it is essential to carefully assess the total cost of ownership (TCO). Some hidden costs, for example, include upgrading hardware, software modifications, improving connectivity, increased training, technical support and planning. These items all cost money or require dedicated staff time. When considering an ASP or software out of the box, keep this in mind.

High-Speed Internet Access: If your organization lacks high-speed Internet access (ISDN, DSL or faster) or is using older computer equipment, ASPs will be an inefficient technology instrument. Because mission-critical information and transactions will be handled via the Internet, it’s important to have the fastest possible Internet connectivity. When considering the costs of using an ASP, you need to factor in any additional cost of upgrading and maintaining a high-speed Internet access network in your office. These costs include cabling and telecommunications charges and a staff-person or consultant to run the system.

On-Site Maintenance: Another critical issue when working with an ASP is the importance of dedicating staff to manage integration of the ASP’s services into your own Internet and Web infrastructure. Most ASPs use a “cookie cutter” approach, offering pre-designed modules. These modules will need to be customized to fit your nonprofit’s precise needs. For example, back-end databases located at the ASP will need to be set up so that they will integrate seamlessly with your in-house databases. In general, don’t underestimate the amount of work this integration will entail. When comparing an ASP versus software installed on-site, factor in this cost.

Reputation and Reliability: Ask prospective ASPs for nonprofit references and check up on their reputation and commitment to technical service and customer support. Also, don’t hesitate to ask “hard” questions to evaluate the business prospects for ASPs. How long have they been in business? Why should you trust them with your mission-critical transactions and data storage? What is their business plan for the coming year? Why do they want your business? Make sure that the contract you sign with the ASP affords you the opportunity to access your data in the event that the ASP gets bought out or ceases its business operations. And of course make sure you have regular access to the data and are backing it up on a regular basis.

ASPs today offer nearly any service a nonprofit organization might need (see samples below). Since many of these services are mission-critical, it is important to make sure that the ASP you choose can handle your information and relationship in a professional way. The process of selecting an ASP has three basic steps:

1. Determine which applications you want an ASP to host. Examples of activities that can use online applications are: donor relationship management, events, accounting, equipment donation, payment service providers for credit card processing, online activism and advocacy systems, auctions, Web discussion forums, Web site search engines, virtual offices, surveys, and volunteer recruitment.
2. Determine what in-house technology capacity is needed. For example, if you’re planning to use an ASP to do credit card processing and event management, you’ll want a high-speed Internet connection and some high-end computers in your office so you can quickly and easily connect to the ASPs to run daily reports on transactions.
3. Evaluate ASPs and obtain quotes. You’ll want to become familiar with their operational capabilities, have a good understanding of the proposed service agreement, review the pricing policies and examine how the pricing changes based on usage patterns, and obtain references from other nonprofits that have used their service.

Below are some examples of ASPs that serve nonprofit needs. For a list of 25 top ASPs visit Dot Org, an Internet publishing venture that covers the evolution of the nonprofit Internet economy. (www.summitcollaborative.com/special_projects.html)

Donor Database Management: Fundraising software from eTapestry enables nonprofit organizations to manage their donor database efficiently from remote locations without incurring the significant up-front and ongoing cost associated with traditional database management systems. One of eTapestry’s unique features is the ability to fully integrate its functionality into an existing organization’s Web site. (www.eTapestry.com)

Social Ecology’s DonorLinkIT service is one of a suite of Web-based tools designed specifically for nonprofits that brings together and manages contacts, database, e-mail, and Web forms, giving you a powerful, complete communication system for donor management. (www.socialecology.com)

Accounting Solutions: NetLedger provides a Web-based accounting solution for small businesses. Nonprofits can go directly to NetLedger (www.NetLedger.com), or they can work with a nonprofit-focused ASP, 3rdSector.Net, which resells NetLedger with additional services and support tailored to nonprofit needs. They offer online tools for accounting, payroll, e-commerce, community, intranets, donor management, Web hosting and Web design. (www.3rdSector.net)

Online Donations—Credit Card Processing: Run by the AOL Foundation as a nonprofit, Helping.org’s credit card vendor takes a two percent fee on contributions, but they take no other fees. They maintain a directory of about 600,000 nonprofits to provide donation and volunteer opportunities to users, and they offer a “Donate Now” button that you can add to your Web site for direct access to your personalized giving page. (www.helping.org)

Entango specializes in secure credit card processing for nonprofits. They handle all the setup of Internet merchant accounts. (www.entango.com)

Advocacy Tools: LocusPocus allows an advocacy organization to recruit and mobilize members via the Internet. Their core service allows a group to send customized, actionable content to individual members with links, customized faxes and e-mails to contact appropriate companies or elected officials. Organizations can develop and manage campaigns virtually, sending reports on response rates, who participated and who received messages. LocusPocus powers Environmental Defense’s online infrastructure. (www.locuspocus.net)

Web Site Development: Network for Change builds online community Web sites for nonprofits and others. You can build a custom Web site, get free Web hosting, and then add tools including networking, chat, Web discussion forums, events directories, job listings, online stores with credit card processing, and online fundraising. (www.networkforchange.com)

Dot Org publishes a free e-mail newsletter, Web content and special reports on selected topics such as ASPs, online advocacy, fundraising and Internet presence. For more information contact info@summitcollaborative.com.

(www.summitcollaborative.com/dot.org.html)
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Marc Osten and Michael Stein are Web and Internet strategy consultants serving the nonprofit sector. They began working on nonprofit technology issues in the 1980s and today assist foundations, unions, management support organizations, nonprofit associations and nonprofit organizations.