NEWS	Week's Top News | Alliances | Business/Finance Product Launches | Trends

December 11, 2000

One of the ASP industry's earliest pioneers this week became the latest victim of the current unforgiving financial climate. HotOffice will cease operations Dec 19th, having failed to secure the funding it needed to keep going. Backers had included chipmaker Intel and stationery chain Staples as well as several venture funds. See related ASP News story on internetnews.com, HotOffice Sees Red, to Close Doors, Dec 8th 2000.

Boca Raton FL-based HotOffice Technologies was founded long before anyone was using the ASP acronym, way back in 1995, to deliver a web-hosted intranet service to the small business market. That makes it one of the first companies to bring a fully Internet-based business application to market as an online service.

But perhaps starting out so early put it at a disadvantage. HotOffice saw its main role as being an online complement to Microsoft Office. But at a time when the concept of using business applications online was completely novel, users had to be educated about the benefits of file-sharing and online collaboration, while partners were either uncertain of the potential market or ineffective at marketing the solution.

Its other disadvantage was a business model that had been defined prior to the dot-com boom. HotOffice had started out charging a monthly subscription for its service, not realising that later entrants to the market would offer similar functionality for free. With hindsight, it seems clear that the death knell sounded for HotOffice in August 1999, with the launch of its chief rival intranets.com.

Having transformed itself from its prior incarnation as a packaged software vendor - in its earlier guise as IntraNetics, it had sold an intranet package priced at $1,495 for 50 users and $4,995 for 500 users - Woburn MA-based intranets.com initiated a classic Internet land-grab. It launched a heavily-promoted free service and rapidly started to pile on users. At the latest count, it claims over 300,000 registered organisations.

HotOffice responded in Oct 99 with its own ad-funded service, giving users the choice of going free with ads, or staying ad-free at the subscription price of $12.95 per user per month. Its revenue would be the same for either option, the company claimed at the time.

But intranets.com had already gone out and grabbed the scale and market profile that was needed to make that kind of strategy work (if indeed it can for anybody - no financial figures are available from intranets.com, which is funded by idealab!). Relegated to also-ran status, by June this year, HotOffice realised it was facing difficulties and began to scale back its operations as it searched for its next round of funding.

Those efforts reached the end of the line this week when, remaining professional to the end, HotOffice informed users that it was closing down, and gave them until Dec 19th to transfer their data to new accounts at intranets.com. The two companies had worked together to put in place a carefully-documented procedure to help users complete the transfer.

In its several years of existence, HotOffice has earned the loyalty of thousands of users, and the respect of competitors, partners and observers within the industry. Its loss will be mourned, all the more so since it failed because it believed in charging for its services instead of giving them away for free.

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

Tools:

Add aspnews.com to your favorites Add aspnews.com to your browser search box IE 7 | Firefox 2.0 | Firefox 1.5.x

Back to Weekly News