DALLAS, Oct. 11, 2000 — Somewhere out there, a $25 billion a year industry is beginning to catch on. This figure, suggested by industry analyst Gartner Group, is fairly typical of estimates offered by other experts on the potential of what independent analysts are calling the computer industry’s “fastest-growing market segment.” It’s simply waiting for the world to take notice. The segment? Application hosting services, which allows businesses to
“rent”
software from service providers.
In 1999, International Data Corporation predicted that the application hosting business would hit $2 billion by 2003. Mid-2000 estimates from Forrester Research and Gartner have boosted that prediction tenfold, putting the market projection as high as $25 billion by the end of 2003.
Not surprisingly, the companies providing these hosted services — which allow businesses to focus on their core business instead of technology — are seeking to take a piece of the application hosting pie. Microsoft has worked on several levels to enable these application service providers (ASPs) to offer needed services, and this week’s launch of Exchange 2000 at the Microsoft Exchange and Collaboration Solutions Conference (MEC) offers a compelling example of how ASPs stand to benefit.
One of the hottest application service segments is messaging — the way that businesses communicate inside and outside their own organizations. This typically refers to email, but managed messaging services is an emerging area where ASPs are offering a wide range of integrated communications functions that help businesses communicate more effectively. By hosting a business’ messaging and collaboration infrastructure and applications — which are the core functions of Exchange 2000 — ASPs are helping a growing number of businesses focus on their core competencies, instead of on technology. With the worldwide launch of Exchange 2000 this week, service providers are learning how they will be able to take advantage of the many new capabilities that Exchange 2000 Server boasts.
As one of the world’s most reliable and scalable messaging and collaboration tools for businesses, Exchange Server has primarily been used directly by businesses that manage their own messaging services. Thanks to a variety of efforts and new technologies, Exchange Server is now primed for hosting by ASPs.
With strong Microsoft technology at its core, Exchange 2000 Server is suited to address the growing need of ASPs for a robust platform on which to base the messaging services that they in turn can provide to their own customers. With its enhanced scalability and the powerful centralized administration and management, Exchange 2000 Server is well positioned to meet the stringent requirements of ASPs. And, as Exchange 2000 Server becomes available, Microsoft and its partners are delivering two significant enhancements specifically for service providers: unified messaging and a comprehensive approach to helping ASPs manage and provision their hosted Exchange services. Taken together, these represent not only new business and revenue opportunities for ASPs, but increased potential for gains in operational efficiency, reduced costs and improved customer satisfaction.
“Service providers are being told every day that they need to offer great hosted services — services that can grow, that are incredibly reliable, and that offer businesses real added value,”
says Thomas Koll, vice president of Microsoft’s Network Solutions Group.
“The opportunities of hosted Exchange services are incredible — both for those businesses that simply don’t have the resources to manage their own messaging services and for the service providers that are delivering those critical messaging services.”
Unified Messaging Provides Enhanced Communication Capabilities — Storage and Retrieval From One Inbox
One important capability that Exchange 2000 offers to service providers for the first time is support for unified messaging. Unified messaging — which analysts expect to boast 170 million subscribers over the next six years — allows a business to consolidate its communication to one point of retrieval, whether it’s voicemail, email or faxes, from a single device. For businesses struggling with different systems for voicemail, for email and for wireless voicemail systems, unified messaging helps them work more efficiently by improving communications between employees, customers, partners and suppliers.
“With unified messaging, you can review and respond to all of your important messages — whether they be email, faxes or voice messages — using either Outlook or a cellular phone,” says Allison Koenig, group marketing manager at Microsoft, noting that unified messaging also provides the ability to quickly retrieve, route and respond to critical or urgent messages in a timely manner — an important factor for businesses desiring streamlined, effective messaging systems.
For service providers seeking new ways to add value for their own clients, unified messaging represents the potential for some significant revenue opportunities. According to research conducted by Ovum Ltd., direct revenues resulting from unified messaging services will total $2.2 billion worldwide in 2002; by 2006, 170 million unified messaging subscribers will be generating $12 billion in direct revenues. For service providers, unified messaging represents a value-add for their own customers, Koenig says.
“Service providers care about unified messaging because it represents an additional service they can add, on top of their existing network infrastructure, and incrementally offer to new and existing customers,” she says. “It allows them to differentiate their services and represents a potential source for new revenues.”
Developed from the ground up as a universal message store, Exchange has long offered the flexibility to handle and store multiple message types. Until recently, however, that capability has primarily benefited those business customers that managed their own messaging systems. Service providers are now in a position to offer those benefits in a hosted environment, thanks in part to Exchange 2000’s use of Active Directory, its enhanced scalability and the Web Storage System.
Active Directory, a key element of Windows 2000, is designed to unite and organize diverse server hierarchies, and has built-in support for voice-related attributes. This makes it easier for users to send voicemail messages, easier for system administrators to manage voicemail-related functions, and will provide a consistent platform for unified messaging solutions built by independent solution providers (ISVs).
The Web Storage System technology in Exchange 2000 Server gives organizations the ability to store, manage and use increasingly diverse types of information, such as email, Web pages and documents from powerful business applications.
“Unified messaging will eventually drive the convergence of today’s separate telecommunications services — voicemail, email, Web pages — into a single, coherent and powerful personal communications tool,” Koenig says. “Right now, there’s definitely a growing awareness of the importance of unified messaging by the corporate customer as well as ASPs looking to host messaging services.”
It is not surprising, then, that many companies are actively developing and delivering unified messaging solutions on the Microsoft Exchange 2000 platform. At MEC, Avaya, the former Enterprise Networks Groups of Lucent Technologies, announced the launch of Unified Messenger 4.0, which addresses both enterprise and service provider markets. The easy-to-use solution has been designed to take advantage of the latest capabilities of Microsoft Exchange 2000, and includes features such as “find-me” and callback notification. It also makes administration simpler and less expensive by providing a single interface for both voice and email administration.
.NET Provisioning, Billing and Management
With the launch of Exchange 2000, ASPs can benefit from the work that has gone into the development of models that will allow them to deploy a cost-effective approach for hosting messaging services end-to-end. This approach for business and operations support systems is available to ASPs as part of an Exchange hosting pack issued as part of the overall Exchange launch at MEC. Designed to make it easier for ASPs to manage and administer hosted Exchange, the resource demonstrates the results of Microsoft’s role as a catalyst in the ASP space — a role that is certainly evident in the business and operations support systems (OSS/BSS) development nurtured by Microsoft technology and partnerships.
“If a service provider wants to offer a hosted service like Exchange, there are at least two essential things they need to be able to do,” explains Lloyd Spencer, OSS/BSS group manager at Microsoft. “First, they have to be able to turn the service on and off — that’s provisioning. And second, they have to be able to bill for it. Without provisioning, and without billing, you don’t have a service.”
The emerging term for these key activities is OSS/BSS — an acronym that is of vital importance to ASPs, since it represents the core functions behind how they can set up and bill for their services. OSS/BSS refers to a collection of software that automates important operations, administration, and customer management tasks that are key to how a service provider runs its day-to-day operations: setting up hosted services accounts for businesses, and finding the most effective way to bill for those services. OSS/BSS comprises applications that provide critical functions like order entry, service provisioning, billing, network management and more. Without these systems, service providers offering hosted application services would not be able to effectively manage their operations, and businesses would find that hosted applications weren’t the time and cost-saving measure they had expected.
While the basic concepts of provisioning and billing sound easy, the process has been less than straightforward for service providers needing to ensure that the various systems required to offer hosted services, such as ordering and billing, effectively integrate with each other. However, because those technologies have traditionally been proprietary — meaning that they conform to no single set of standards — they have not been easily extended to other systems, and ASPs have had difficulty selecting OSS/BSS applications that can effectively
“talk”
to each other. This has often resulted in a lengthy and costly customization process for the service provider, requiring that they either rethink their procedures to extend the existing system, or build entirely new applications.
“Packaged service offerings, and OSS solutions that can work in-concert to collectively activate and manage such offerings are a differentiating factor for many service providers,”
said Paul Hoff, senior manager ASP Market Development, Portal Software. Portal Software, Inc. is a vendor of billing solutions that has worked with Microsoft as part of its OSS Working Group, a group focused on standardizing OSS/BSS solutions for service providers.
“Having OSS solutions that can truly integrate is a vital component for service providers wanting to succeed in the ASP market.”
Microsoft and several of its OSS/BSS technology partners have taken an important step to ensure that ASPs that wish to host Exchange can do so without that costly investment. The key to standardizing these OSS/BSS systems lies in another acronym that is perhaps slightly better known throughout the industry: XML.
XML Provides Key to Low-Cost, Standardized Solution
eXtensible Markup Language (XML) has been key in delivering to service providers a powerful set of tools for effectively managing hosted Exchange 2000 services. Through XML, a standard recognized by the World Wide Web Consortium (W3C), Microsoft and its partners have begun work on creating open OSS/BSS solutions that can be easily modified and implemented. As a result, ASPs deploying Exchange 2000 Server now have access to a powerful set of tools for billing and provisioning — tools that can be deployed to address a variety of service needs.
By using XML as a standard for developing OSS/BSS solutions, OSS vendors ensure that the various operations technologies can effectively
“speak”
to one another. Then, when an ASP goes shopping for an OSS/BSS solution, their ability to select a system they know will interoperate with other key systems makes the process of hosting much more effective.
Partners and their technologies are key to the process. For instance, Xevo Corp. uses Windows 2000’s Active Directory to profile customers and services, saves Exchange 2000 usage on a per-user basis in a SQL Server database, and communicates with billing applications such as Portal’s Infranet. Microsoft’s work leading its OSS Working Group is centered around the idea of bringing the right partners together with the right technologies, and finding agreement on those technologies that best serve ASPs.
The work done by Microsoft and its OSS/BSS partners can be used to manage a wide range of application services beyond hosted Exchange 2000 as well. Using XML as a standard programming format, the vendors that develop OSS/BSS applications can extend today’s OSS/BSS infrastructures in a way that further enables service providers to focus their investments on deploying new services, instead of costly OSS/BSS applications based on proprietary and closed architectures. Microsoft’s OSS Working Group members are currently defining XML schema that can be used by OSS/BSS vendors as they advance their service provisioning, billing and management applications.
As Exchange 2000 is made available around the world, many organizations looking to access technologies like unified messaging and the overall benefits of hosted Exchange will be turning to service providers for an efficient way to handle their communications. Armed with technologies like Exchange and unified messaging — and vendors that understand their needs — those ASPs seeking a piece of the hosted applications pie are well-equipped to succeed.
