ASPs react to analyst scepticism

Application service providers (ASPs) offered strong responses to an article published in ARN (October 11, page 18) where IDC market analyst Wilvin Chee claimed the ASP business model was unlikely to "rock the software market" in the Asia-Pacific region.

Although many ASPs on the local front agree with much of Chee's analysis of the region's potential to embrace the concept, several believe the negativity of the comment does not reflect the current nature of their businesses.

"Our experience is that ASPs are taking off in those areas organisations feel comfortable about outsourcing," said Bob O'Connor, general manager of marketing for human resources and payroll, with ASX-listed ASP, Concept Systems.

"The IDC article suggests that nothing much is happening in this space, but I disagree," O'Connor said. "I'd still say it's early days, but it must be seen as evolution rather than a revolution, and ASPs are actually doing quite well."

O'Connor and several of his peers in the ASP market suggest Australian businesses are often misrepresented as not having the advanced business models necessary to take advantage of the ASP model. This point was highlighted by recent comments made by Daniel Louppe, director enterprise and Internet communication Asia-Pacific for Intel.

"The ASP market globally is doing very well, but over 90 per cent of the growth is in the US," he said. "In Asia and Australia, the business model isn't right for it yet. Many of the services are too expensive to be viable ASP options and the business models don't suit ASP business models.

"But that is not to say that people are not doing some very interesting things in the ASP market in the region," he said.

Marc Niemes, national marketing manager for education ASP Impaq, suggests that the only challenge with regards to customers concerns the fact that the most suitable customers for these services are too varied.

"Smaller SMEs are the most suitable customers for these services but they are also difficult to get in front of," he said. "They can also be a little uncomfortable with technology."

Another challenge facing ASPs in this country is bandwidth and infrastructure, according to its pioneers. WebCentral CEO Lloyd Ernst, for example, is more confident with offering some services in Japan than he is in Australia because he isn't able to get service-level agreements (SLAs) from the likes of Telstra.

"A good ASP is based upon good broadband access and low latency," he said. "Someone needs to come to the ballpark with SLAs or our infrastructure is going to hold us back."

Niemes said that there is also a problem with how the ASP has been traditionally conceived. When the initial hype of application service provider model reared its head, its benefits were, and still are often thought of, in terms of applications that commonly sit on desktops - applications that are stock standard and not configured to the needs of the business.

Niemes questions whether a typical desktop application or small business application, like Microsoft Office for example, would be practical if sold through an ASP model. The programs are already priced moderately and function fairly consistently on standard PCs. So needing to pay connection fees to use them online would be inefficient. But applications developed specifically for the business' needs on the other hand are more likely to be successful in such an environment.

Concept Systems' O'Connor agrees.

"I think what you'll see is an evolution of what people view as an ASP," he said. "The reality is that it's not Microsoft Office of Oracle Financials that is going to work. That will never eventuate, at least in my lifetime, because no two companies are the same.

"But if you can do it quickly and cost-effectively, it's the specialist vendors that will succeed," he said.

"An ASP has to concentrate on one key application or one business process," said Impaq's Niemes. "The ASP works when there's actually an application people want. If you're not getting subscribers, you're delivering the wrong application.

"As a service provider, you have to be purely dedicated to knowing your vertical market," he said. "The technology is secondary, nothing more than a delivery mechanism.

Copyright © 2000 IDG Communications, Inc.

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