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Appshop Sticks to Its Guns
By Kevin Newcomb

January 14, 2004

Oracle application outsourcing specialist Appshop has found success by sticking to what it knows best, and recently realized that it can win more business by actually walking away from prospects that don’t fit its strategy.

“We’re gaining traction because we’re staying true to who we are, which is an expert-based firm,” Appshop CEO Larry Abramson tells ASPnews. “We specialize in one technology set. A lot of the generalist firms do not have the same amount of expertise that some specialists have.”

As a specialist, Appshop has been able to initiate partner strategies with generalist firms and white-label its services under the brands of what a naive onlooker might see as competitors, Abramson says. “That’s an important strategic positioning for Appshop, because it allows us to deliver our expertise in this technology stack through the venue of other firms that truly benefit from it.”

Appshop today manages over 450 Oracle environments, and over 350 enterprise-class servers in 2 world-class data centers. Those numbers make Appshop’s business larger than the Oracle practices of some of the larger generalist firms. All of this experience gives Appshop the edge when it comes to handling all aspects of Oracle application outsourcing, Abramson says.

“Even when you look at something as simple as disaster recovery — disaster recovery within the context of an Oracle application environment is very different than what you can just buy in general on the market. When you perform disaster recovery in an Oracle environment, you need a lot of custom work to make sure that you don’t lose data,” he says.

Appshop’s specialization seems to be paying off. In its last fiscal year, which ended November 30, 2003, Appshop booked more business than in any other year in Appshop’s history, and closed business with 6 separate Global 1000 firms. In December alone, Appshop closed $7.5 million in outsourcing business, Abramson says.

“Why are we having such great traction today? It’s because we’re getting much better at communicating our value proposition, and at walking away from business,” Abramson explains. “Historically, Appshop sold to a lot of very small companies. Today, we have what we call an ‘on-strategy’ approach. When I took over this company, the first thing I asked myself was ‘Why would anyone buy services from a specialist firm?’ The answer is that we believe there is a prototype, an ‘on-strategy’ type of company that will buy expertise almost every time.”

Some of the attributes of an on-strategy company are large, complex Oracle environments that are beyond the capabilities of anyone just dabbling in the space. “Multi-language, multi-currency… Give us essentially the worst that you can conceive of, and that’s where Appshop will start to shine, that’s where we can start to differentiate ourselves,” Abramson says.

Another key in the strategy is to only sell to experienced buyers. According to Abramson, inexperienced buyers of Oracle services do not know enough about potential problems to ask the right questions. “It’s very difficult to differentiate between one Oracle service provider and another. Only the most experienced buyers have learned the painful experiences that would drive them to do that differentiation,” he says.

“Many times, we have walked away from business. If we walk into a CIO’s office and see a stack of Oracle marketing material on the desk, our salespeople are supposed to thank them very much and essentially disengage. That’s not our prototype.”

Instead, Appshop seeks out the battle-hardened CIOs who have been through bad experiences with other service providers, who have bought services that just didn’t pan out. They find the most success when they deal with people who are skeptical enough to ask the right questions, Abramson says.

“When those questions get asked, Appshop is going to float to the top. When we sell to customers we consider on-strategy, we win 75 percent of the time. When we sell to off-strategy customers, we lose 75 percent of the time.”

While Oracle has been stepping up its own application outsourcing initiatives of late, that has only helped Appshop, according to Abramson. As Oracle has marketed and has created awareness for Oracle Application Outsourcing, it has attracted more companies that fit the mold of on-strategy customers, which means that Oracle’s marketing is actually driving Appshop’s business.

“It’s been incredibly beneficial. If you look at the market, there are really only two firms that have scale in Oracle outsourcing. We have scale, and we can fairly assume that Oracle has scale as well. The very customers we are targeting and selling to typically do not buy from a sole source, it’s not their process. Their process is to find multiple vendors, go through a selection process, and select the best firm,” Abramson says.

The result is that Appshop’s pipeline has nearly quintupled in four quarters, all without a formal marketing department. But Abramson insists that Appshop’s relationship with Oracle is not adversarial.

“Appshop and Oracle have a very sophisticated, complex relationship. Appshop was an innovator in this space, we helped define the Oracle application outsourcing space. We legitimize the space today by being successful. It’s very helpful to Oracle to have a successful firm like Appshop in the market,” he says. “Appshop influenced a lot of Oracle license revenue last year, and we will continue to do so. We’re an important part of the Oracle economy.”

As further proof, Abramson points out that in 2003, Appshop was one of five companies to win Oracle’s Partner of the Year award. “Even Oracle values the fact that we exist,” he says.

“We work with them as closely as we possibly can. We work together and partner on vastly more things than we compete on, and when we do compete, we do it openly and ethically, and whichever company the customer selects, it’s a win for Oracle,” he continues. “Oracle partners and competes with nearly every firm in this space, whether it’s outsourcing or consulting, or any service related to their product set.”

Appshop has been recognized as a Top 25 Provider on the Top 50.

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