Monolithic vs Component ASPs

There is a diversity of 'applications' hosted in various ways. The word ASP is almost overloaded with different meanings.

Newcomers entering the domain often assume 'ASP' means 'Enterprise ASP' (eg SAP outsourced to a data center.) Others assume 'ASP' means 'business services dot-coms', since those are so much more numerous and visible in the small business market (time & billing, purchasing, payroll, cash & banking, etc).

We have all seen newcomers have rude awakenings, when they realise the other guy means something completely different. What are the real segments among ASPs? Are there divisions where the forces driving their decision-making are really different? Where you can predict their behavior, or market outcomes?

The enterprise segments include data center and network infrastructure providers who are almost always discrete, separate entities from ERP software providers. It is notable that none of the big infrastructure providers seems engaged in building enterprise applications themselves. Will they be in a permanent relationship with software companies, rather like the airlines with Airbus or Boeing?

In small biz the most obvious segmentation is the little remote-control ASPs running shrinkwrap software over Citrix links, versus the dotcoms who actually have web-enabled software or conduct business over the Internet.

The dot-coms are much more interesting. The single purpose dot-coms are racing way ahead of the big platform providers such as Corio and USi in the number and diversity of services they offer - and often in performance/value. If this continues, within a year or two even large corporations will be down there, using essentially these same vertical and horizontal dot-coms.

Is this caused by the same dynamics that drive software creation itself? The dynamics that, when a developer or team of people have a great idea and the ability to build it, they almost always get a better deal by going down the road, renting an office and building it themselves rather than staying inside a huge telco or backbone operator or software company as employees?

These dot-coms are ASPs. They are the real ASPs, if you ask me.

The historical perspective is that competition has arrived in the software market, in the form of ASPs. Since the platform is the Internet, instead of a proprietary desktop, nobody can break their software or change the APIs or put them out of business. So these new dot-coms get a foothold, get better and better, and fight as if their lives depended on it. They will win.

So the real question is, what are the segmentations, the behavioral predictors within the dot-com sector of the ASP market.

This comes down to monolithic versus component. Some of the dot-coms want the whole pie, spend hundreds of millions to provide a complete solution, and actively work to keep other ASPs or desktop software from interacting, and keep customers locked in. Examples, in my opinion, AOL, MS, Intuit. (Yes - they are ASPs too. See those taillights up ahead? hear the doppler shift?)

Meanwhile, other ASPs are blazing a trail into interoperability. In my niche, webledgers are building relationships to integrate with other dot-coms in near-real time, turning them effectively into very competitive midrange accounting platforms overnight.

Numerous dot-com ASPs are working very hard to integrate with what they seem to find on subscribers' desktops. For example OneCore.com provides downloads to Quickbooks, Peachtree, Champion, MYOB.

So maybe I'm out in left field but I think the most important segmentation in ASPs is between the 'monolithic dot-coms' and the 'component dot-coms'.

This latter development is really the future, in my view, for small business. It's the only way to reach low cost, high volume and bust open that pinata so that small developers can participate in the software market, in human-scale development projects.

This article was first published February 1999 as a posting to the ASPnews.com discussion board. Other postings by Todd include:

• More on monolithic vs component (Feb 8th)
• Egoless General Ledger (Jan 11th)
• XML Schema for General Ledger (Jan 7th)
• Rolling thunder; living in a webledger universe (Jan 7th)
• Evaluating WebLedger ASPs solutions (Dec 4th)
• Accounting ASPs - key factors (Nov 9th)

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