The ASP reincarnation

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August 31, 2005 (Network World) -- Esker Software develops document and delivery management applications. So two years ago, when it was struggling to integrate an unwieldy customer relationship management (CRM) system with other back-office applications, the suggestion that it didn't need to "own" the software but instead could outsource the functionality seemed like heresy.

"It just stunned me that someone would actually think of putting their data off-site," recalls Mitch Baxter, Esker's executive vice president for business development and a member of the company's board. "I'm a software company guy. It just seemed profane!"

Yet after a pair of short pilots, Esker, a French company with U.S. headquarters in Madison, Wis., scrapped a planned upgrade of its Siebel Systems Inc. CRM system and rolled out Salesforce.com to 180 users in 60 days, joining the ranks of thousands of companies procuring enterprise applications as Web-based services for a monthly subscription fee.

Software as a service -- which typically eliminates hefty upfront license costs and requires little or no hardware or IT personnel to install, configure or maintain -- is growing in popularity among large corporations and small businesses alike. Last year's successful public stock offerings by fast-growing providers Salesforce.com Inc. and RightNow Technologies Inc. have shined a spotlight on a software delivery model reminiscent of the buzz surrounding application service providers (ASP) in the late 1990s.

Fallout from the tech stock collapse in 2000 claimed many of the estimated 1,000 to 1,500 ASPs that sprouted in the late 1990s to offer hosted enterprise applications over the Internet. But as the economy has recovered, the surviving ASPs have been joined by a growing cadre of companies delivering software as a service. Hardware vendors such as IBM and Sun Microsystems Inc. are preaching the on-demand gospel, along with traditional enterprise software companies such as Siebel, Oracle Corp. and SAP AG, which offer hosted versions of their applications in response to upstart competition and strong user demand.

"Forgotten but not gone," is how Gartner Inc. analyst Ben Pring describes the software-as-a-service delivery model promoted by ASPs. "It was gathering steam and momentum all the time, whilst it was out of fashion."

Indeed, the new generation of software providers led by Salesforce.com and RightNow now use terms such as on-demand software to describe their offerings. Unlike applications hosted by some ASPs and traditional enterprise software vendors, these have been built from the ground up to be shared by multiple clients and delivered over the Internet.


Market researcher IDC recently dropped the term ASP and uses "hosted application management" to describe companies that provide outsourced hosting of packaged software. Hosted e-mail and security providers and companies such as early ASPs USinternetworking Inc.

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