Asp form validation

GLOBAL FINANCE: Why does the ASP market seem to have fallen out of favor with investors?

BUTCH WINTERS, chairman and CEO, ROI Direct: This market is still young. Most ASPs are building good-size customer bases and validating the model, and most of the bankers have started coverage. A couple of quarters out, you'll have a lot more attention and coverage. But there are risks. In many cases the ASPs do not control the technology; they license it. Plus, when you're talking about end-to-end solutions with toptier applications, it's an extremely complex process. RANDY ATKIN, general manager, Interliant ASP Solutions: Validation is beginning to happen. We've been through multiple contract renewals and a major version upgrade, all successfully, and have not lost clients in the process. DEEPAK GUPTA, senior vice president, PeopleSoft eCenter: Customers are very confused because there are so many companies out there claiming to be an ASP At the same time there are many different ASP models, and it has not been shown to be scalable yet. ERIC KELLER, executive vice president, finance, Corio:This model will take time to demonstrate profitability, and Wall Street is currently not very patient. They're concerned about how much it will cost to become a successful ASP But I do believe companies want to focus on their core business and not to spend so much on applications, so the business model is valid.

STEVE McMANUS, president, e-commerce, USinternetworking:We think the model is validated and that enterprises will buy software as a service. RICK FRESIA, CFO, Qwest Cyber Solutions:While CFOs and CIOs haven't taken to the model as quickly as we thought they would, they will once we get them to think of ASPs less in terms of price and more in terms of "mindshare recapture." This is about regaining time and not having to worry about tape backups and software upgrades.

GUPTA: When customers talk about cost, I ask them,"What is the opportunity cost of not having your people focus on strategic initiatives?"

MARK PATTON, general manager, NetObjects: One of the problems for ASPs is overcoming the inertia of an existing system. It's less of a problem in the Internet and small business space where they're creating new systems, so the ASP approach fits neatly. GF: What are the benefits ASPs offer customers, and what difficulties do ASPs have to overcome?

McMANUS: Our clients' internal IT organization would be our main competitor. To make our business work, you need clients on an accelerated growth path, where the internal IT organizes tion has someone that has some vision and understands the two fundamental issues: time to market and quality. ATKIN: We can actually help internal IT organizations by taking on their functional pain. We can bring best-ofbreed, and with our hightouch support levels, we can make them look good, too. ANDY SAYARE, vice president, technical marketing, Applicast: If you look at the ASP market today, a lot of it's about delivering applications to customers, but we really believe this is about delivering business value to our customers, doing things they couldn't do themselves.

GUPTA: Over the next five to 10 years, software will become a service, like electricity or water The ASP market hasn't matured enough to make that change yet, but it will.

CHRIS PHOENIX, vice president and general manager, iBusiness Citrix Systems: Exactly.The ClOs we speak to say they want to be able to do this, but not yet, because we haven't yet solved the prob1 ems surrounding integration.

GUPTA:That will need the development of standards. Once those standards exist, integration will cease to be such a bottleneck. WINTERS:We've developed a product management function that sits above the applications level and looks at the integration points, because that's where the value is in those applications. It gives us a 360-degree view of the client and the client's customers.

KELLER: One of the great benefits, particularly for a larger client who's thinking of installing an enterprise application, is that an ASP can get the application up and running in a matter of weeks, whereas the company itself would probably take up to 18 months before they're really functional on the system. FRESIA:We also get great people. IT professionals know that if they work for an ASP, they'll be valued, work on diverse projects, and be at the cutting edge. Large companies can't attract that kind of talent because they don't value it the same way.

PATTON: Another big advantage is that the ASP model takes care of application upgrades. The customer is always assured of having the newest technologies. PHOENIX: And an ASP model can support a community of interests in a way that's hard for IT departments to do.This brings new benefits, expanding the whole range of tools available to businesses. KELLER: One key problem for an ASP is this: The more applications you cover, the more attractive you're going to be to a broader array of customers.At the same time, the larger your footprint, the more difficult it is to make a profit.

GF:What criteria should a user apply in evaluating a potential ASP, and what criteria do you use in evaluating customers? McMANUS: Creditworthiness is the key. Because we price our service on a long-term contract, we have to be very rigorous about that. For clients the most important criteria are the breadth of offerings you have and your reference-able customers. Can they call someone who's already done it, and are they of the same scope and size? WINTERS: Creditworthiness cuts both ways. Clients may be concerned because of the dotcom fallout - and ASPs are considered guilty by association or because of the negative press or suspicion about the survivability of an ASP model. KELLER: It's important to ensure that your customers really "get it," that they're under no illusions that doing an inhouse installation would be easier, cheaper, or better.

GUPTA: It's a long-term relationship, and the cost of moving to another provider is huge. So it's extremely important, before you choose a vendor, that you have a clear idea where you'll be five years from now and try to find a partner that can get you there.

SAYARE: We urge our customers to consider how well their ASP understands their business, so they can add value over time. An ASP should really be able to prescribe what a company needs to succeed as it grows and gains complexity.

ATKIN: We try to help customers plan and to be ready to support them, because we see ourselves as an extension of their long-term staff. GF: What applications make most sense for an ASP? ATKIN: The most applicable area to partner with an ASP is in the critical but noncore areas of the client's business. These areas are more readily outsourced without loss of key client differentiation factors and can be scaled more successfully for both technical and economic benefit by the ASP McMANUS: Our largest segment is in the e-commerce space, particularly where existing businesses have to take that business to the Internet. SAYARE: Another key area is applications that evolve over time or connect to processes that evolve over time.The real value of an ASP model is that it supports change over time. GUPTA The key word here is service. All applications can be considered a service, so the issue from the customer's perspective is which applications they want to buy in that service.

PATTON: It depends what your expertise is. If you have credibility, customers will expect you to deliver something that really works in their market space. Anybody can hang out a sign saying, "I'm an ASP" but people who have an installed base and existing trust have a huge advantage.

PHOENIX: As an ASP you're supporting a wide variety of different applications. That offects prof itability: You have to have a certain critical mass to cope with such diversity. The small guys have very specific application entities, and they're going to have to consolidate.

GUPTA: The biggest sign of success in the ASP market is going to be when we stop selling applications and start selling complete solutions. That's when this market will turn from horizontal to vertical. WINTERS: That happened in the VAR market.VARs now focus on solutions, not just on getting hold of products. Long-term success for ASPs will be based on whether they add sustainable value and form the right types of relationships.

KELLER: One way to measure the success of the ASP market will be when larger and larger companies begin to say, "We don't need to operate all these systems inside," and then begin to outsource them.

GUPTA: We already have customers saying,"I'm not buying a license, I'm buying a solution." FRESIA: Customers want a predictable monthly bill.They don't want to pay for a license up front, for a thousand seats of perpetual use. That's going to become the big issue as ASPs begin to talk about multimillion-dollar upfront bills for licenses.