The new licensing programs fell far short of ASP hopes that Microsoft would offer the kinds of volume or waterfall discounts that ASPs could use to woo larger enterprise customers. This is because they have primarily been designed to win new business among smaller enterprises - see related ASPnews.com analysis, Microsoft Backs ASPs to Stem Software Piracy , August 9th, 2000.

But the introduction of a per-CPU licensing model for back-end products such as Windows 2000 Advanced Server, Commerce Server, and SQL Server could help ASPs serving large numbers of users with these infrastructure and management products.

ASPs participating in the pilot program gave Microsoft clear feedback that its original pricing model for these back end servers — which actually involved three separate licenses — was far too confusing. So, in August, after the pilot program was over, Microsoft surprised everyone by announcing a greatly simplified per-CPU pricing and licensing model.

Grumbling providers

In theory the model will benefit ASPs. With a per-CPU licensing approach, the ASP need not keep track of transactions or subscribers when implementing these products, making record keeping much easier. But ASPs do need to figure out how many CPUs are required to support their customers' reliability and scaling needs — and that's the part that is causing the most grumbling.

Despite running pilot schemes with ASPs since the middle of last year, Microsoft waited until the pilots had ending before announcing CPU-based licensing. As a result, ASPs have not had the opportunity to develop and price a customer service built around this new licensing scheme, They are reserving judgment about whether this aspect of the new licensing program is really going to benefit their businesses. However, once they've modeled those services thoroughly, they are likely to be able to price those services more attractively to meet the needs of medium and large organizations.

One more factor that will slow the growth of these services is Microsoft's failure to deliver any tracking, reporting and billing tools to help manage these per-user and per-CPU licenses. Only close Microsoft ally Data Return is prepared to announce its CPU-based services at the beginning of September. Others are waiting for Microsoft to complete its certification program before launching these services.

Differing approaches

ASPs with strong hosting backgrounds, such as Data Return and Digex, are focussing more on the delivery of infrastructure services and management than on the direct delivery of software services. They will also building tracking and billing services for value-added reseller (VAR) partners as a part of that managed service.

"Enterprises need hosting and management services, which is primary reason they use Digex management services," said Andy Hunn, director of business development at Digex. "Software resellers need to move aggregately to tie their volume pricing programs to the kind of management model that an ASP enabler like Digex can provide. This is a growing pain through which vendors need to move so ASPs can assist companies in deciding between perpetual and non-perpetual licensing."

In contrast, ASPs such as USInternetworking (USi) are persisting in a pure-play model that encourages the enterprise to come to them for one-stop shopping. Rather than working with VARs or ASP aggregators, they're using their own field force to go after those enterprises who are looking for a complete outsourced solution.

"For enterprise customers looking for a single company to handle end-to-end deployment,USinternetworking is continuing to fill the role of pure-play ASP," Matt Howard, VP of business development at USi, told ASPnews.com. "The ASP model becomes extremely complex and confusing when you add in 'enablers,' 'aggregators' and 'agents', and that's not good for customers. We're continuing a vertically-integrated approach with a direct sales force, who work closely with third party integration firms, offering the end-to-end services that are at the heart of the ASP value proposition."