ASP Will be Dead in a Year

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A year from now we won’t be talking about ASPs. In fact, the phrase ASP will be as deadly as ‘dot.com,’ suggests columnist Peter Slavid.

In a year’s time the ASP “phenomenon” will have ground to a halt. I won’t dignify it by calling it an industry, but whatever it is, will be no more.

Don’t get me wrong–the concept of software as a service, which is the essence of ASP, is a very good one, and, hence, is here to stay. The delivery of software to a user’s desk across a network is also set to become a major trend for the future.

So how can these two apparently contradictory statements be reconciled?

Let us look back a year or so, to the start of the ASP “phenomenon.” A small number of companies invested heavily in building data centers on the principle that “if we have this capability, customers will come.” Investors also held the view that there was massive potential in delivering applications from these centers to millions of small- and medium-sized enterprises (SMEs). Based on this potential, analysts started projecting billions of dollars of ASP business. Hence, more people began investing in the industry.

At the same time a whole host of software houses, network suppliers, ISPs, and consultants started labeling themselves as ASPs, thus fueling analyst forecasts. This, in turn, led to further investment and so the story continues.

Where Are We Now?

Most companies have finally realized that delivering applications as a service is not too different to delivering applications as a product. The service needs tailoring, it needs someone the customer can trust, and it needs expertise in both the product and the customer. Inevitably, there are exceptions, and real volume commodity businesses may emerge in real commodity spaces such as mail, messaging, and office.

However, for the most part, the level of skill needed to deliver applications across a network is higher than that required to deliver a product. What we, therefore, see today is many start-up companies retrenching practices and workforce and cutting costs. Many are also moving their business models to a more service-oriented model, with consultancy and tailoring being key elements.

What’s more, the term ASP has become tainted. ASP has the same ring about it as dot.com –it smacks of start-ups and perhaps unreliable organizations–exactly what you don’t want when entrusting your applications to another company. There is some justification for these concerns, as very little thought has actually been given to some of the risks of the software rental model.

Where Will We Be Next Year?

I believe we will see a managed service model emerging as a standard way of doing business. This will be a service delivered to a company by a Managed Service Provider (MSP), which may be on a rental model, and it may be shared to a certain extent or it may be individual to the company in question.

This new model will carry many of the benefits that were touted for ASPs. For example, time-to-market and availability of skills. But, to my mind, it will not carry expectations of a substantial price shift. There will also be no pretense that “one size fits all.” This new model will, however, require the same involvement between company and vendor as any application deployment always requires.

Some of the companies emerging as MSPs will have started out as ASPs. Others will emerge from an outsourcing or systems integration background. But, in order to succeed, this should be an activity founded on good practice and technology, and not on hype. As such, MSPs stand a good chance of becoming a self-sustaining, long-term component of the IT industry.

Peter Slavid has held a number of senior marketing positions at ICL from its days as the UK’s indigenous mainframe manufacturer through to its current role as a leading IT services company. Today he is Business Strategy Manager and is a frequent speaker on the ASP conference circuit. He welcomes comments and feedback from readers, both in the ASPnews.com discussion forum or direct by email to peter.slavid@icl.com.