Weekly ASP Industry Review

Small business financial software giant Intuit has snapped up online applications catalogue Apps.com in a surprise deal, it announced last Monday (Feb 12th).

In the wake of recent shutdowns and cutbacks, online applications have fallen out of favour among mainstream investors and analysts. But that doesn't mean they're going to go away. Intuit has picked an excellent moment to sweep in and tuck the startup portal under its wing.

Cambridge MA-based Apps.com, which ASPnews profiled last Aug, is an online directory of more than 5,000 web-based applications and providers. The operation has now been assimilated into Intuit's offices in Waltham, MA after the acquisition closed in December 2000.

Apps.com lists a wide range of business and productivity tools and a host of niche applications, and allows users to post their own reviews and rate the solutions available.

But the real value to Intuit is not so much the portal itself and its links to an army of proven web application developers and ISVs. The true context of the acquisition was the launch of the Intuit Developer Network, announced the same day.

Intuit is aiming to build a network of third-party developers that create add-ons and tools that plug into its own range of small business products and services. The Intuit network gives developers access to application programming interfaces (APIs) that they can use to link directly into its software from their own packages.

Intuit has already published APIs for its online Web site creation and management tool, and for its recently launched Wwb-sharable database service, QuickBase. A draft API specification is now available for its core QuickBooks financials package.

Now that it has Apps.com, Intuit has a ready-made community of developers as well as a user community for those developers to sell to. It's the perfect launchpad for building a marketplace for online add-ons to its products, which is just what it will need to hold on to its 80 percent share of the retail market for small business accounting if web-based applications start to take off. Whatever Intuit spent on Apps.com and it was unlikely to have been a large sum given the current economic climate — certainly qualifies as money well spent.

Good news, bad news
There was plenty more positive news in the ASP industry last week. Microsoft was so impressed by the channel program operated by application infrastructure provider Allegrix Inc that it paid an unspecified sum to licence the AIP's "ASP-in-a-Box" reseller training and ASP-enablement materials. Leading enterprise ASP USinternetworking Inc announced that it cut its EBITDA operating losses by a third in the fourth quarter last year, down to $12 million from Q3's $18 million. Web-centric accounts provider Intacct announced a substantial $21 million funding round.

But ASPs are so out of fashion these days that CNet, a rival service to ASPnews parent's internetnews.com, chose instead to run a four-month-old story with a bad news spin.

The story reported that ERP software vendor JD Edwards "in a quiet move ... exited the hosting business last October."

Except that there was no cover-up or attempt to keep the news quiet. Visitors to ASPnews read that story on the day it broke last October — see JDE Returns to Channel-Only ASP Model. The ASPnews coverage was not only timely, it also put the story in its proper context, making it clear that JDE was merely shutting down an unsuccessful operation that hadn't impacted its longstanding channel-based ASP initiative.

So why does a mainstream news service choose to run a stale bad-news story instead of reporting what's really going on this week in the industry? Part of the answer is that specialist trade media simply do a better job of reporting the industries they cover. But in this instance it may also be a positive sign that the tide of bad news about ASPs has finally started to turn — leaving the mainstream titles scratching about for stories to fill the sudden void of doomsday news.

That's not to say the stories of job losses and failures have come to a sudden stop. There is still plenty of bad news to come from companies whose business plans were conceived at the height of dotcom euphoria. But even bad news loses its novelty eventually. You can expect to start seeing some good press for ASPs sometime soon — and remember, you read it here first.

This review of the week's news highlights is by ASPnews.com founder and consulting analyst Phil Wainewright. A comprehensive news digest is published every month in the ASP News Review newsletter, available exclusively to subscribers.

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