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ASP coalitions final appeal with corporates - Industry Trend or Event

ASPs have been given a boost of confidence by two new reports, which reveal that corporates and SMEs are ready to outsource their applications.

It seems the recent announcements of applications service provider coalitions among carriers, hardware and software vendors are not falling on deaf ears: IT directors are ready to rent.

Two new reports from London consultancy Ovum Ltd. reveal that corporates as well as small and medium-sized businesses worldwide want to reduce the overheads and responsibilities incurred in running their own software and feel ready to outsource the headache to ASP consortia.

"It was thought by some potential ASPs that IT directors would block the idea because it would devalue their role, but the research did not bear this out," explained Katy Ring, author of ASP: Opportunities & Risks. "Today's IT directors are overburdened with work, so if they can delegate responsibility for noncritical applications to a supplier, that means they can concentrate on delivering the critical projects to the business."

Ovum surveyed IT and business managers in 53 corporate and SME companies in Europe and the United States last year.

"We have found it quite easy to demonstrate that by using the ASP model, managers can reduce their software overheads by 30%," said David Hill, commercial head of BusinessManager. BT's ASP division. "Many more will gain access to technologies that they could only have dreamed about."

Although Business Manager has found only three customers in the last year-among them waxworks museum Madame Tussaud's--Hill expects that number to be in the hundreds by year end and that it will really take off in 2002. A major part of BT's strategy is to provide connectivity and data center skills to wannabe ASPs, as well as to push BT as an ASP in its own right.

Careful targeting

Roger Walton, author of the Ovum report ASP: Market Strategies for Telcos and ISPs, thinks the success of BT and other service providers will come from careful targeting of applications. He believes that large, complex applications such as enterprise resource planning software (ERP) suites are more suited to full-scale hosted services than to the rental market, and that office productivity applications such as Word and Excel would better fit the rental model.

"ASP success will depend on the one-to-many principle." he said. "If it requires too much integration and customization, like ERP suites, the economies of scale won't work. Things will take off when a new generation of applications that are based on reliable connectivity and the ubiquity of the Internet can be delivered in some kind of browser window."

Although BT's early exploits have been with R/3 ERP modules from Germany's SAP AG and a joint venture with Oracle corp., it plans to launch a hosted Microsoft Office suite soon.

Redmond, Washington-based Microsoft Corp. is also helping to evangelize applications hosting, targeting independent software vendors (ISVs). Speaking at the London launch of the Applications2Go (A2Go) initiative with partners compaq computer corp. and Esoft Global Ltd., Gordon Smilie, business solutions group director, Microsoft Ltd., said: "There's currently a huge lack of applications in the hosted market, so we need ISVs to get involved. They will gain a massive return on their investment, while business users will see a wider more diverse set of applications."

ASP aspirations

Service providers of all shapes and sizes are making plans for the ASP space. Business ISP PSINet Inc., of Herudon. Virginia, admits to actively seeking a platform for a data center so that it can host a number of applications, while cable operator Telewest communications plc, of Woking, England, plans to launch applications for SMEs. although it would not reveal further details.

Insiders at MCI Worldcom Inc., of clinton. Missouri, say the global carrier is interested only in providing connectivity to hosted data centers, although its ISP subsidiary, UUNet, may want to take that one stage further and be the host.