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ASP Market Takes Off, Taking Linux With It

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As a start-up, we had to watch our costs. Linux was easily the least expensive platform.

Aspiring application service provider (ASP) NetLedger Inc. faced a key question as it prepared to launch its services in the spring of 1999: What platform should it select to support its services? The San Mateo, Calif.-based start-up, which provides accounting services to companies with 50 employees or less, looked at Linux, Solaris, and Windows NT. “We determined Linux offered us the best combination of high performance and low pricing,” says Dave Durkee, chief information officer at NetLedger, which now has 500 servers from VA Linux Systems Inc. running Red Hat’s Linux distribution.

Moving from one to 500 servers in less than year is a common occurrence for hyperactive ASPs, who run firms’ Internet and business applications. Analysts expect this emerging space to grow rapidly: the total U.S. ASP market should top $48 billion by 2003, according to Deloitte Consulting.

The ASP market got much of its impetus from companies which turned to their ISPs to host Web applications. Moving applications out of their own data centers allows corporations to offload mundane chores like backup, software upgrades, and monitoring server performance.

Seeing a profitable opportunity, many ASPs quickly began offering other services as well, frequently beginning with e-commerce related chores such as checking a customer’s credit history and billing them for a purchase. Now, companies like NetLedger are going after specific niches, such as providing office automation services like electronic mail and groupware, or back-office systems like payroll, human resources, and supply chain management. Other are concentrating on vertical markets, including legal, finance, and real estate. And not wanting to get left behind, established industry players such as Oracle Corp., PeopleSoft Inc., and SAP AG have launched their own ASPs to offer complete suites of their application software.

Not surprisingly, interest in ASP services is growing. “Six months ago, many companies did not know what an ASP was but now these services have become an accepted IT business practice,” notes Brigitte Casemyr, vice president of marketing at Mission Critical Linux LLC, a Lowell, Mass., consulting firm.

Add a Customer, Buy a Server

However, scaling capablility has not been easy for ASPs. They offer a new type of service, one that requires expertise to solve every possible hardware, software, and network problem. Putting a technical support team in place with that ability and developing the businesses processes needed to function effectively is a complex process. ASPs must also address basic infrastructure issues. “Software vendors never designed their applications so they could be divided up among companies sharing common servers, so each time an ASP adds a new customer it must buy another server,” explains Joshua Greenbaum, a principal at Enterprise Applications Consulting, a Berkeley, Calif. market research firm. This is one of the reasons for the increase from one to 500 servers at NetLedger, which expects to have twice as many servers operating at the end of the year.

Start-up Ensim Corp., of Sunnyvale, Calif. has designed products to solve the one-customer, one-server problem. The firm’s software sits on top of an operating system and lets an ASP divide it into distinct segments for each customer. “We tested the software and found it can support as many as 800 partitions,” says Vikram Mehta, vice president of marketing at the company.

Linux was the first operating system the firm chose for its products. “As a start-up, we had to watch our costs as we tried to prove that our software would work and Linux was easily the least expensive platform for us to work with,” explained Mehta.

ASPs, many of whom have used Linux for Web hosting or e-commerce, often reach a similar conclusion. In addition to being inexpensive, Linux is simple to install — for companies which are already familiar with Unix, at least — and more reliable than Windows NT.

“Established companies already have servers and operating systems in place,” says Casemyr at Mission Critical Linux. “Many don’t want to add another to the mix, so there can be some resistance to using Linux. ASPs are greenfield operations with no existing infrastructure, so they are able to put in whatever technology best meets their needs and Linux’s strengths come to the fore.”

While the operating system has strengths, it also has weaknesses. “An ASP has to be sure that its underlying hardware and operating system will be able to support a customer’s business applications,” explained Enterprise Applications Consulting’s Greenbaum. “Right now, there aren’t a lot of companies running SAP’s R/3 on Linux.” System availability and scalability are top considerations for many IT managers looking to buy servers. And some of them view Linux as inferior in those areas to operating systems such as Sun Microsystem’s Solaris and Hewlett Packard’s HP-UX.

Linux vendors have been moving to address those problems. “ASP applications have to be constantly available, yet Linux lacks clustering capabilities, which improve reliability,” said Brian Stevens, vice president of Internet Strategy at Mission Critical Linux, which has written Linux middleware to address the problem. TurboLinux Inc., of Brisbane, Calif., has also tackled the problem with its TurboCluster Server, which can support up to 25 systems grouped in a cluster so Linux can perform like a high-end server.

“Linux is a young operating system, so it is not surprising that it has shortcomings, both real and perceived,” says Enterprise Applications Consulting’s Greenbaum. “There is no doubt that vendors will address these issues and as that occurs more ASPs will be drawn to it — especially because of its attractive pricing structure.”

Paul Korzeniowski is a freelance writer in Sudbury, Mass., and specializes in networking issues.

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