The Art of Outsourcing

Anybody in the technology food chain can tell you that ASP is a handy acronym for application service provider. The problem is that some broadly applied terms like these tend to confuse more than they explain. Even those with more than a rudimentary grasp of IT might be hard-pressed to define exactly what ASPs are or specifically what they do, other than being a system for delivering Web-based business applications.

There are many variants of ASPs and many business models, but the most common one involves a vendor hosting hardware and software off campus from a CG company, which then pays a usage fee to access the application through the public Internet or a private network. Since the application is Web-based, it is scalable and easily configurable.

Additionally, IT resources are essentially outsourced, meaning that staffing and budget responsibility for hardware, upgrades and ongoing maintenance are off-loaded to the vendor. It is this feature that can bring a smile to the face of a CFO.

Outsourcing Growth

To be sure, some companies cling to the basic client-server mindset, believing that all systems should be owned and operated in-house. But the ASP model is gradually winning over vast numbers of new converts, especially in light of present economic conditions and tight IT budgets. According to Gartner, the IT outsourcing market in North America will grow from $101 billion in 2000 to a staggering $160 billion in 2005, nearly a 60 percent jump, and partly fueled by the attractiveness of the ASP model.

Among the companies that have achieved success with outsourced business solutions is Mrs. Smith's Bakeries, the top frozen-pie brand in the United States, which looked at both in-house and outsourced trade-management-fund solutions before settling on an ASP model by Gelco. "Before Gelco, we were using Excel spreadsheets to manage our trade promotions," recalls director of trade marketing Steve Boynton. "It was a total disaster."

Gelco likes to think of itself as a BSP -- a business service provider -- rather than as an ASP, owing to the fact that the firm lends both business and transactional support to its clients. ASPs, on the other hand, traditionally only provide technology support.

Collaborative Solutions

Another good example of this kind of deployment is that of consumer-goods giant Alberto-Culver, the $2 billion manufacturer of brands like Static Guard, Alberto VO5 and Molly McButter. When Alberto-Culver decided to realign its sales structure, the company feared that it would be difficult to maintain accurate historical records that are essential for trade-promotion analysis.

Like Mrs. Smith's, the company decided to turn to Gelco's trade management solution. The result: a considerably smoother transition than anybody originally expected. "The changes are input into the Gelco system overnight, and I receive an audit file the next morning to confirm that the changes have been implemented," explains Mary Ellen Minta, Alberto-Culver's trade management program administrator.

Gelco also helped develop some process improvements, including a method to edit program identifications in the trade-management system and a self-explanatory realignment form to help clients communicate all necessary information directly to Gelco in a collaborative relationship with Alberto-Culver. "By first gaining a thorough understanding of our realignment objectives, our business account manager at Gelco worked with us to create a more automated process for making realignments as smooth as possible," Minta says.

Acosta Innovates

An intriguing new outsourcing solution is being deployed by Acosta, one of the largest food and consumer packaged goods (CPG) brokers. The outsourcing solution is built on the strengths of three leading software companies using the name VeriSync Trade Solutions, a provider of outsourced technology solutions to help small to mid-sized manufacturers collaborate in the CPG industry.

The newly formed company offers three easily integrated applications to help CPG companies speed transactions, save money and solve the critical problem of incorrect product data moving between manufacturers, brokers and suppliers. The new offerings include: InfoLync (category management software); ItemLync (product management and supply chain products); and TradeLync (trade promotion and deduction software).

VeriSync is built on the combined strengths of MEI, which specializes in promotion and deduction management systems; Integrated Software Systems (ISS), provider of e-Catalog, UCCnet connectivity and product management tools; and Sudden Impact, developer of automated category management software.

"Being at the center of this industry and dealing daily with manufacturers and retailers of all sizes, we were compelled, in the absence of an affordable and linked solution in each area, to develop an integrated software solution," says Gary Chartrand, Acosta chairman-CEO.

Sara Lee E-procurement

Another outsourcing option, e-procurement, is being deployed by Sara Lee/Douwe Egberts, one of Europe's best-known companies and one of the most important divisions of its Chicago-based parent, Sara Lee Corporation. It generates $6 billion in annual revenues, about one-third of Sara Lee's total revenues.

The Sara Lee/DE project was headed by CFO Theo de Kool and was spearheaded by Accenture. It involved a new e-procurement solution offered by ePValue, then a joint venture between Accenture, Sun Microsystems and iPlanet E-Commerce Solutions. It provides an e-procurement application accessed directly from the Web via the company's own portal