Much of the core of the ASP market continues to survive, despite the fact that many early ASPs went the way of dot.com companies selling cat supplies.
According to IT market researchers Gartner Group, the surviving ASP market is poised for a renaissance. Gartner predicts that 30 per cent of new software and solutions deployed by businesses will by 2010 be delivered in the “software as a service” model through service providers such as ASPs.
Software as a service describes an approach whereby an external service provider owns applications and the supporting IT infrastructure, which they sell to a customer as a recurring fee-based managed type of service.
“I don’t know if the ASP market ever really went away completely,” said Christopher Ambrose, a research director with Gartner Group in Stamford, Conn. “It is certainly more quiet and behind-the-scenes right now, which is consistent with the life cycle of new entrants and services into the marketplace. First you get the rapid rise, then the hype cycle, then the dropping off, and soon it becomes more of a mature way to do things.”
ASPs have over the last few years evolved from providing generic office and productivity solutions over the Web, to selling what Gartner calls on-demand or software-as-a-service — essentially concepts, which describe the notion of selling the function of software rather than the software itself. In this model, ASPs might offer specific vertical solutions. More ASPs today are targeting specific industries and becoming experts at tailoring their offerings to the requirements of a given industry.
Take for example Salesforce.com. The company provides a set of on-demand services and adds value in the form of its expertise and experience in the sales force automation market. Salesforce.com looks to tailor its sales force automation solutions and deliver this as managed service to each customer.
“The most successful ASPs are the ones that are vertically focused, like Salesforce.com in the CRM space, or WebSideStory.com in the Web-side analytic space,” said Robbin Hopper founder and CEO of the Burlington, Ont.-based iUpload.
iUpload provides content management and e-marketing solutions services to such companies Zurich Financial Services, Visa, University of Waterloo, Agriculture Canada and Grand & Toy.
Hopper said the current success of iUpload is based on a move away from selling generic solutions to specializing in content management expertise. Specific vertical market focus persuaded many companies to consider ASPs for the delivery of key business processes. One of the main stumbling blocks with early ASPs was that customers did not trust some of the newer technologies used or the ability of an ASP to actually consistently deliver a solution. iUpload sought to prove to its customers, not only that the company understood their business issues and the technology, but that iUpload could deliver these in a cost effective way.
Hopper said content management delivered through an ASP approach can be attractive to many businesses who view as too expensive the alternative of implementing a full-scale, in-house solution.
“Content management software, even today, is [difficult] to implement and has a price-point well into six figures,” Hopper said. He explained that, by using an ASP, customers might eliminate hidden costs such as those that occur with solution implementation and the actual operational cost of the supporting IT infrastructure itself.
“Companies come to us to help them spend a predictable amount of their Web management budgets,” he said.
Chris Williamson, president of the Edmonton-based MarketWeb Solutions Inc., agrees that the ASP market, especially in Canada, has been moving away from generic solutions towards more specialization. Williamson’s own company has shifted its focus away from delivering generic Internet-based solutions for SMBs to specializing in ASP services for the financial sector.
“We seem to be getting into more compliance-type, financial services and even medical services markets and companies,” Williamson said. He explained that his company did not decide to move into vertical markets, but was instead pulled into these markets by ever-increasing vertical demands.
According to Williamson, what might drive a customer to an ASP is typically when a business finds itself moving away from quickly built or hastily rolled-out solution implementations to more standardized business solutions and processes.
Williamson sees the security and data management markets, especially among smaller companies that are opening branch or multiple office locations, as another growing area of opportunity for ASPs
“One example is a lighting company here in Edmonton that has offices now in Vancouver and Calgary,” Williamson said. “One day they had been broken into and all of their laptops and data was stolen. They lost all of their accounting data and had to essentially start from scratch. That company’s accountant came to us and we recommended to them that all of their accounting and other applications be hosted with us. We will manage all of the solutions and the infrastructure, and the offices can then access the data and financial processes any time they want. We can back up and manage all of the data. So an ASP model becomes very attractive to [this type of] smaller company, which really cannot afford to have half of their operating budgets going into manage IT and data.”