Read and React

"First-generation enterprise ASPs have been the equivalents of the horseless carriage-makers, hand-crafting traditional enterprise applications for delivery to the limited market that can already afford them." Talk about the evolution of ASPs in ASPnews Discussion Forum

But the simultaneous departure of founding CEO John Charters makes it likely that Cyber.Solutions' forthright commitment to the one-to-many process automation of the pureplay ASP model will be significantly diluted. Thus Cyber.Solutions is disappearing along the same path already taken by many others in the enterprise ASP sector — adopting either hosting, outsourcing or systems integration as their core business, with ASP delivery as an option, rather than the core proposition.

Praising Not Burying ASPs
Rather than being a source of dismay, I welcome this development as a cause for celebration. It marks the beginning of the end of what I have called the "horseless carriage" phase of the ASP industry.

Looking back over the past century, we now know that the motor vehicle was what business guru Clayton Christensen, author of The Innovator's Dilemma, would call a disruptive technology. It wiped out earlier industries, and introduced new capabilities that ultimately led to broad structural changes throughout business and society. (For more on Christensen and the ASP model, see Oracle, NetLedger Execute Textbook Deal).

That impact was not evident in the early years, when the first commercial applications of the motor vehicle were as a sustaining technology. It enabled carriage makers to offer a motor-driven option as an alternative to the traditional horse-drawn carriage. The technology became disruptive only after refinements to ride quality and the beginnings of a widespread network of filling stations had created the conditions for a market large enough to sustain low-cost assembly-line manufacturing. By the time the Model T Ford was introduced, motor vehicles were no longer seen merely as carriages that didn't need a horse.

When that shift started to take place, motor companies who'd built their businesses around delivering hand-crafted motorized carriages began to go out of business, or were absorbed by larger rivals. The survivors were the companies that realized the best opportunities lay not in selling high-cost one-offs to the traditional buyers of carriages, but in creating new variants that delivered all the potential of the new technology to a broader market. So it is with the ASP industry today.

First-generation enterprise ASPs have been the equivalents of the horseless carriage-makers, hand-crafting traditional enterprise applications for delivery to the limited market that can already afford them. As we move towards the next phase, most will wither away — although that's not to say they can't remain as viable businesses for some time to come. After all, Rolls-Royce, the archetypal horseless carriage-maker, is still with us today. Perhaps USinternetworking, despite its current difficulties, always will be, too.

A New Day Dawning
The real action, however, lies in a different direction, where a new industry is emerging to harness the technology of online services for new purposes. So while the disappearance of Cyber.Solutions will give brief satisfaction to those who continue to believe in the supremacy of hand-crafted, horse-drawn software, in reality it signals the dawn of a new era of highly automated, network-powered services.

Other early pioneers of the ASP model are gaining in strength having either forsworn or forsaken any involvement in the application technologies of yesteryear. One of the most successful is salesforce.com, which last week released new editions of its network-powered sales force automation and customer relationship services.

Building on an entirely network-centric platform, Salesforce's offering has now reached such a level of sophistication that it is fully able to go head-to-head against the most daunting of its horse-drawn software rivals. The core is an automated, shared-server implementation that the likes of Siebel and others cannot hope to match for cost-effectiveness. Yet salesforce.com's enterprise interface management and offline support delivers equivalent functionality and control without the management complexity inherent in operating conventional, hand-crafted enterprise packages.

Another company that's on an upward path is Interliant, although its Q4 results last week reveal that this trajectory is a recent reversal, coming at the end of a prolonged decline. Two years ago, the company unwisely bought into the enterprise ASP model. It has spent the past year unwinding those and other investments, focussing instead on the provision of network-powered services on a private-label basis.

Like Salesforce, Interliant's services are based on an automated, shared-server core, but rather than offering an online version of an existing application, Interliant provides functionality that wasn't available before the Web existed. It offers small business Web site hosting along with a portfolio of complementary tools including Openwave Web-based e-mail, Trellix Web-site creation, Urchin traffic analysis and Miva e-commerce. The integrated private-label solution is delivered under the customer's brand — names such as Dell, IBM and Sprint — and with a reporting and management console that leaves them in full control of how the offering is presented to their small business clients.

Salesforce and Interliant are just two examples of the opportunities for ASPs to survive and prosper in the emerging era of automated, network-powered services. Some will lead the provision of business functions direct to end users. Still more will create and manage the infrastructure over which those and other services will run. This is an era that will change business and society at least as fundamentally as the advent of motor transport. ASPs, software vendors and every other IT industry participant — like the horse-drawn carriage industry of a century ago — can choose either to go with it, or to be left behind by it.