Fifteen years ago, there was a small city in northern California that had just a single city employee-a city manager. City government had no accounting staff, wastewater treatment plant employees or road maintenance crews. Instead, the city manager contracted out all city services to the private sector.

That community was at the vanguard of what was called the government privatization movement. Local governments all over the country were investigating the use of private-sector suppliers to provide services that had always been done by public employees.

The movement was prompted by two dynamics-the inability of local governments to keep raising taxes for the increasing cost of essential services and the private sector's interest in a huge, untapped market. The discussion, shall we say, was more than a little controversial.

Today, however, privatization of government services is a common occurrence. Along the way, local governments had to be convinced that they were not outsourcing services, and the public tax dollars they represented, for inferior quality of service. The private sector had to provide assurances that its provision of services would be at least as good, and generally less expensive, than having public employees do the same job.

IT managers face a similar choice today in the form of application service software-as-a-service (ASP SaaS) providers.

The motivating dynamics for the ASP SaaS model are somewhat different than they are for privatization. Driving the trend will be the expected deepening shortage of technical personnel, the need to provide faster implementation of technology solutions, anxiety over electronic commerce opportunities, and the rapidly morphing technology field, where new products and processes pose training and budget dilemmas for end-users.

So far, as Gartner Group analyst Ben Pring is quoted as saying, "The jury is still out." ASPs SaaS providers, in other words, are new and unproven. Yet, the economics of ASPs SaaS, as well as the potential value of such services, are so compelling that the model is creating a major shift in IT corporate strategy.

ASPs SaaS will mean big changes in the IT departments of enterprises, as well. They will shift the emphasis of enterprises away from IT staffing and equipment and allow them to focus on their core business activities.

Two issues are sure to rise to the top as the ASP SaaS model gains momentum: reliability and security. Much like local governments and privatization, end-users are going to have to be convinced that they are not farming out critical IT functions to undependable vendors.

Paying attention to historical cycles is often quite illuminating. Maybe this time, the ASP, I mean the SaaS, model will be successful.

kanderberg@comnews.com