and here's the flipside. I think it's wrong......
ASPs Are Doomed
Mary Jo Foley, ZDNet
Few events hammer home the meaning of the phrase "Internet Time" like the premature death of the application service provider (ASP) market.
Sure, virtually every company--ranging from Oracle to Merrill Lynch to HotOffice--suddenly is calling itself an ASP. Local papers are full of ads from "hosting" companies offering users access to Exchange-based e-mail for $9.95 a month. And market researchers continue to make astronomical predictions regarding the size and growth potential of the hosting market.
Just last week, GartnerGroup released new numbers, pegging the ASP market at $2.7 billion this year and $22.7 billion by 2003. That's a compounded annual revenue gain of 92 percent.
But seemingly overnight, the fledgling market has become overcrowded and ill-defined. Renting access to Web-hosted software sure sounds like a good idea. But identifying the best ways to deploy and maintain hosted networks--not to mention retain customers and make money--is a path fraught with peril. Just ask Microsoft, which continues to waffle on the subject. One moment, it's running several hosting pilots and poised to become a major ASP. The next, it's pooh-poohing the market.
Skeptical Market
Microsoft is not alone in its doubts. A growing pool of companies believes the original ASP concept is all wet. These companies realize there isn't much money in hosting individual Outlook accounts. But they aren't sure how, when or if Web hosting will catch on with midsize to large customers. So these businesses are racing to adopt "total service provider" (TSP) or "industry-focused ASP" hosting models.
"The shakedown's happening at ASP speed," says David Halvey, a senior VP at Internet-centric holding company Safeguard Scientifics. "No one knew what an ASP was a year ago. Now the term's so ubiquitous that it's lost all meaning."
Safeguard Scientifics is advising companies in which it has a stake, including US Interactive, CompuCom Systems, Cambridge Technology Partners and Opus-360, to move beyond the ASP model to the TSP concept. The distinction between ASPs and TSPs is subtle at first. The key difference is in apps vs. services, Halvey explains.
"Now, the focus is on integrating hardware and/or software," he says. "The next model will be integrating services. You will get traditional ASP services, but also integrate with other ASPs and service providers, giving you a total solution in a box.
"In five years, we will see the true outsourced economy," Halvey adds. "No service will be done in-house. Instead, there will be a network of affiliated service providers, bringing you everything-app delivery, management consulting, Internet connectivity, Web-site design and hardware infrastructure."
Plain Vanilla No More
It's not just Safeguard that sees this shift. Many "traditional" ASPs don't want to be known as plain, old ASPs anymore.
The "leading application service provider for growing companies," Corio, is planning to reposition itself early next month.
Also next month, a relative newcomer to the ASP market, AristaSoft, will launch its hosting business. The company will bill itself as an "industry-focused" ASP, concentrating on a handful of vertical segments. To fulfill its mission, Aristasoft is building a suite of 10 to 30 hosted applications for specific vertical markets. It plans to start out with a hostable suite aimed at the high-tech equipment market. The key application anchoring this suite will be J.D. Edwards' enterprise- resource-planning system.
"Companies in the small- to medium-size space are looking for complete solutions to run their businesses," says AristaSoft VP of marketing Lorenzo Martinelli. "Our value-add comes from picking the apps in the suites. We are becoming the IT departments for these companies."
AristaSoft is offering customers integration of multivendor applications, adds Martinelli. "ASP is just a delivery model. It's like saying you're a retailer. What you deliver over the channel is the differentiator. While other [ASPs] have a horizontal approach, selling one app, we know companies need someone to integrate a number of apps."
Before the TSP or vertical ASP models truly can take off, the high-bandwidth pipes over which these myriad apps will be served must be in place. Consequently, the back-end data-center providers, also known as commercial service providers (CSPs), and telcos also will be key to any kind of next-generation hosting models.
But there are differing schools of thought as to the role CSPs should play in the hosting space going forward. ASP Verio, for example, recently purchased data-center provider DigitalNation, giving it an in-house, dedicated hosting capability. And Qwest Communications wears several hats, blurring the lines between bandwidth provider, CSP and ASP.
As bandwidth becomes less of an issue, you can expect to see more companies make a run at the hosting market. Just don't call them ASPs. |
