A decision framework for SME Information Technology (IT) managers: Factors for evaluating whether to outsource internal applications to Application Service Providers

Businesses have been seeking new ways to improve their Information Technology that will better fit the company's needs with limited investment or even cost cutting. In order to achieve this many businesses have been turning toward Application Service Providers (ASPs). There are a number of factors supporting ASPs. ASP's can provide one service that connects multiple applications through one access point. The technology is very simple, straightforward, and easy to use for various businesses. There are also factors that do not favor ASPs, including service reliability, customization, integration, upgrades, and security issues. This study examines the paradigm shift from the traditional software model to the ASP model, and explores the favorable and unfavorable trends in ASPs. While the on-demand model seems to be a promising model for companies, there are certainly many decisions for a business to consider before making commitments to an ASP. Hence, this study aims to help IT managers evaluate each factor very carefully before outsourcing their internal applications to ASPs. It develops and provides a methodology for better IT decision-making with regard to ASPs which could be provided to other IT decisions as well. As “cloud” technologies, exemplified by ASPs, transform the world we live-in, better decision-making tools for small businesses will impact their success in the 21st century business world where SMEs can effectively compete with large businesses leveraging these services.