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By Phil Wainewright April 30, 2001 Further confirmation that the ASP model has moved firmly into the mainstream came this week with news of a survey by the Software & Information Industry Association (SIIA). Just under half of 1,000 software vendors surveyed by the organization said they currently deliver products in the Software-as-a-Service (SaaS) model, while another fifth plan to do so in the next year. See Survey Says Software Publishers Moving to Service Model. The survey did not, however, go on to ask whether respondents knew what they were letting themselves in for. While it's relatively easy to Web-enable software for delivery on subscription, this is just the first step. Long-term survival requires vendors to re-architect their software into a Web services model, overhaul their licensing practices, and either learn to work with channel partners or dedicate themselves to a narrow vertical market. The most difficult challenge for software vendors will be the adjustment to taking an increasingly backseat role. While "software as a service" is gaining currency as an alternative name for the ASP model, in one sense it is a misnomer. It is not the software itself that becomes a service. Software is an enabling technology that, in the ASP model, becomes part of the infrastructure supporting more efficient, adaptable and cost-effective business services. If the software fulfills its role really well, the user should not even notice that it is there.
SAP Carnage SAP stands head and shoulders above its competitors as the vendor with the longest trail of failed or stumbling ASPs to its credit. Setbacks for early partners such as Australian vendor Solution 6 and North Carolina-based Interpath at the beginning of last year were followed in July by the closure of Pandesic, SAP's own joint venture with Intel. Last month saw the sudden collapse of Miami-based Hostlogic, while last week startup Finetrics, which had aimed to deliver software combined with accounting services to small businesses, closed its doors. It has to be said that others in SAP's channel, such as Agilera, eOnline, Qwest Cyber.Solutions and European outsourcer TDS, seem to be thriving. Perhaps it is time for SAP to pass on the secrets of their success to their less fortunate brethren.
Service Integration ASPs can make a success of service integration, provided they specialize in a vertical market of which they have detailed knowledge. This vertical service provider (VSP) model is fast becoming established as a category in its own right, and proponents such as Trizetto and Portera already have significant businesses. But as ASPnews has already spelt out in previous analysis, running a professional services division acts as a brake on growth for an ASP that operates horizontally rather than vertically. See ASPs Go Head-to-Head with Integrators, Dec. 14th, 2000. Last week, leading ASP USinternetworking pulled out of offering professional services as part of a restructuring that saw a 25 percent reduction in headcount. Despite the cutbacks, USi's decision to leave service integration to others may well have enhanced its growth prospects, adding extra scalability to its model. 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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