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Heavy Industry Hitters Join ASP Fray

A number of high-profile players have recently broadened and deepened the ASP market, including leading service companies PricewaterhouseCoopers and Deloitte Consulting.

By No Analyst or Consultant

November 04, 1999 — CSO — A number of high-profile players have recently broadened and deepened the ASP market, including leading service companies PricewaterhouseCoopers and Deloitte Consulting. Moreover, a number of other players, including IBM, Microsoft, and Cisco, continue to focus on the ASP market for infrastructure-related offerings.

Although the attention of top industry players lends much-needed credibility to the ASP movement, Hurwitz Group believes that this market needs more than credibility. In fact, the ubiquity of the term "ASP" in marketing materials can have the opposite effect, as indicated by recent industry articles bemoaning the term's loss of meaning and focus. The ASP model needs to address a broader range of potential customers than the vaguely defined "mid-market" that has been the focal point to date.

Much of the recent ASP activity can be viewed as a series of either offensive and/or defensive positions taken by vendors in a market in which nobody wants to be left out. No vendor of significance wants to be left without a "chair" to sit in when the music stops, which is one reason for the continuing emergence of alliances and consortia. Yet, sustainable ASP business models remain experimental and unproven from the standpoint of scalability and profitability.

Recent trends in the ASP market include the following:

  • A continual broadening of ASP offerings including conferencing, collaborative messaging, and productivity applications.

  • More emphasis on ASP offerings for higher-end customers than the typical mid-market emphasis, including greater provision for customized ASP solutions. In particular, Deloitte Consulting and USWeb/CKS are pursuing strategies geared to providing a higher degree of customization than previously seen among ASPs.

  • A shift in emphasis toward e-Business applications. Early ASPs emphasized "enterprise" applications, such as ERP, which fit the key role of the ERP providers in initially propelling the ASP market. However, the center of gravity for the ASP market is now rapidly shifting toward e-Business applications.

THE HURWITZ TAKE:
The continuing addition of industry players is good news for ASPs, but many challenges remain. The suitability of the ASP model for emerging enterprises, including "dot.coms," is already proven, but its wider applicability, particularly to larger enterprises, has only been partially demonstrated. The most likely entry point for these customers lies in new incremental opportunities, including time and expense reporting, customer relationship management, and of course, e-Business. The ability of ASPs to provide application services at scale will require substantial data center management and change control disciplines.

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