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By Phil Wainewright April 2, 2001 After a week in which several of the weaker members of the ASP community made news, it's important to keep in mind that most of the ASP failures that we have witnessed so far have failed not because they were ASPs, but for separate business reasons.
Futurelink's share price slumped a further 50 percent on the news to close just above 28 cents, more than 99 percent down from the all-time high of $38.50, recorded mid-March 2000. But out of those $125.9 million revenues for the year, barely $5.4 million came from ASP services. Despite its high profile as a standard-bearer for the ASP model, Futurelink has never made much headway in actually delivering ASP services. Most of its revenues have come from its traditional systems integration business, using longstanding expertise in Citrix technology to implement server-based computing solutions for enterprises. Its strategy was based on the assumption that expertise in building and managing data centers using Citrix and related Windows terminal technology would provide a foundation for success in the ASP market, once customer demand for ASP solutions started to take off. The flaw in that strategy is that it is never enough to have just the technology. While Futurelink spent handsomely on promoting itself as an ASP, it never managed to develop a compelling customer proposition, instead relying on its chosen ASP model becoming compelling of its own accord. In the meantime, Futurelink scrambled to grow, aiming to dominate the anticipated emerging market. It made seven substantial acquisitions of Citrix-focused systems integrators, and it is the fallout from buying and integrating those purchases — struck at the high prevailing prices of 1999 and early 2000 — that is at the heart of its current problems; no doubt compounded by the current downturn in enterprise spending on new IT projects. In view of the latest news, it's somewhat ironic that Futurelink was still winning accolades earlier this month for its entrepreneurial prowess, including recognition as a "Ramp Champ" by Forbes ASAP magazine, which ranked it as one of the 100 best-managed, fastest-growing technology companies. The award only serves to underline that Futurelink's strategy was highly rated at the time the ranking was compiled — but that times have changed in the intervening months. That, however, is a reflection on Futurelink's business strategy, not on the viability of the ASP model itself, where Futurelink had already admitted it was gaining little traction — see my earlier analysis from Jan 22nd this year. Futurelink has always been a prominent cheerleader for the ASP model, making significant early investments in building public awareness that helped to drive momentum for the entire industry. But despite its infectious enthusiasm from the sidelines, it has never seemed to really come to grips with the finer points of the game as a player.
Up for Sale One of Futurelink's early software vendor partners was Saleslogix, subsequently relaunched as Interact Commerce after it bought the Act! sales contact tool from Symantec. Now Interact Commerce is to become part of British smallbiz accounting software vendor Sage, which also owns Peachtree and Best Software. See Sage Agrees to Buy Interact Commerce for $263 Million in Cash Interact stumbled last year after launching an online portal for users of Act! and the midmarket Saleslogix sales automation package. In another example of a non-ASP business error, the company forgot to build revenue streams into the portal's dot-com business model, preferring instead to aim for a high spin-off valuation based on the traffic it acquired. It abandoned the venture in Oct 2000 — see Mixed Fortunes For Customer Relationship ASPs, Nov 16th, 2000. Sage has been more cautious in its online strategies and now has the opportunity to offer an extended, integrated portfolio. Another early optimist in the ASP market was USWeb/CKS, which subsequently merged with Whittman-Hart to become MarchFirst. In February 1999, its then head of e-services told ASPnews, "We are the largest application services provider in the world." — see USWeb claims ASP leadership, Feb 25th, 1999. It later garnered an $82 million investment from Microsoft to develop an architecture for Internet-based application services. Now MarchFirst has fallen victim to the downturn in spending on dot-com showcases and is breaking itself up to pay off creditors. A large part of the company is to go to Internet incubator-turned-software-company Divine, it announced Friday, including the company's SAP hosting arm — see Divine to Buy marchFIRST ASP. Whatever mistakes or misfortunes befall individual ventures, there are plenty more companies out there with the resources to pick up the pieces and build on the successful elements of their achievements. Many ASP ventures will fail, for a variety of reasons. But others will continue to find value in their ASP assets. 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. |