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Dangerous Liaisons

Symptoms of Outsourcing Success

Agile Workforce, Agile Company

Cap Gemini Ernst & Young (CGEY) has formed a strategic and exclusive relationship with Corio Inc., an ASP "with a broad footprint," according to Craig S. Johnson, vice president and director of ASP solutions for CGEY.  Corio, which specializes in SAP, PeopleSoft, Siebel, Commerce One and BroadVision solutions, will become the sole ASP provider of those applications for CGEY, who will become the "solutions designer and implementer." The consulting firm plans to focus all of its clients' systems integration and business transformations around Corio's applications.

Johnson says the consulting firm consummated the relationship by taking an equity position in Corio.

The exclusive marketing arrangement requires CGEY to refer all of its ASP opportunities for the applications Corio supports to the San Carlos, California company. The agreement includes client companies in North and South America that have $1 billion or less in revenues. Banking on success, Johnson anticipates the next phase of the agreement will make the exclusivity global.

Currently, CGEY is taking the Corio solution to all its major accounts, introducing them to the joys of the ASP business model. The consulting firm is also marketing the relationship along service lines talking to its customers already using SAP and Commerce One, for example. Eventually it expects to develop specific product lines for each Corio application. Of course, it is also going directly to the market to offer hosted applications to new clients.

Why the Consultants Partnered with an ASP

Johnson said CGEY is building a "value web" for its clients. The consultant plans to  form marketing agreements with other ASPs and Business Service Providers (BSP) so that it can "bring in pre-integrated packages to our clients." The consultant wants to offer a comprehensive solution, believing its clients trust its judgment in selecting premium partners.

Johnson anticipates corporations receiving applications from a Web-enabled service provider "is the way the world is going to go." However, CGEY views itself as a technology and systems integration and management consultant. It felt it could not remain on the cutting edge without somehow providing these Web-based services. Since it did not want to become an ASP itself, it chose to forge an alliance with one.

Why did the consulting firm choose Corio? Johnson says he believes Corio occupies a "unique" position in the marketplace. Its total focus is on applications management, including the integration of the various best of breed applications it supports. Corio calls this integration technology Orion.

For example, a CGEY client company wants to use both PeopleSoft and Siebel. Somehow these two different applications have to talk to each other. Corio can prewire these two software solutions so they can be easily integrated. "That's very powerful," says Johnson, pointing out a company can spend "millions of dollars" building those interfaces.

"We think Corio is unique because of its focus on applications, not infrastructure," continues the outsourcing consultant.

In addition, Corio hosts SAP and Commerce One, the on-line trading exchange engine that powers business-to-business (B2B) transactions. This is a good fit for CGEY since it is a big player in the B2B marketplaces, according to Johnson.

Large Corporations Turning to ASPs

The evolution of the ASP model convinced the consultants to select a strategic relationship for its future path. As Johnson sees it, ASPs came into being to provide cost effective offerings for start up companies that wanted single applications. Today, however, these "hypergrowth" companies want to buy multiple application packages from their ASPs.

In addition, huge, complex corporations are now turning to ASPs for single applications. The executive predicts larger and larger enterprises will continue to turn over more and more of their applications to their ASP providers.

These Fortune 500 companies are testing the ASP waters by only outsourcing a single solution, like ecommerce. "They want to see how the ASP can support their size and complexity before jumping in with both feet," says Johnson.

Johnson says the new arrangement with Corio was meant to position CGEY to be ready to handle both the large corporations' entrance into the market and the hypergrowth company's expansion into multiple applications.

Johnson expects an ASP shake-up by 2002. According to Darwin's law of the survival of the fittest, he expects only a few strong companies to survive. He is certain Corio will be one of them.

Buyers Want a "Total Solution"

In his opinion, all the survivors will have to offer a multi-package environment. "You'll need to bring a total solution," he says. Buyers' demands for increasing complex solutions "play to our strengths," he points out.

Lessons from the Outsourcing Primer:

• Believing that the ASP business model will be the primary way corporations receive applications in the future, CGEY formed a strategic partnership with Corio, an ASP.
• The first generation of ASPs developed specializing in only one application. Now, the successful ASPs are offering multiple applications due to market demand.
• For the first time, larger corporations are outsourcing to ASPs. They are testing the waters just outsourcing one function so see if the ASP can handle an assignment of their size and complexity.
• Integration of various applications is key to a total outsourcing solution.

Publish Date: September 2000

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Copyright © 2000 - Everest Partners, L.P.

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