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By Paul Rubens March 15, 2002 What's the secret to making money from the ASP model? Ask around and you'll get a bewildering range of answers: Own the software you deliver, own your data cener, own the infrastructure, offer other people's software, provide templated solutions, offer a full service, be a telco, just provide the billing systems ... and so on. Different strategies have come and gone — and in some cases come back — over the last year or two, coinciding with the successes and failures of high-profile industry players. But there is at least one strategy that has stayed in favor during that period, bringing a wave of ASPs which, for the moment at least, are looking increasingly successful. The niche or boutique ASP that targets a specific industry appears to have found a formula for success. Most of these specialist ASPs are privately owned so it's difficult to know exactly how well they are doing financially, but many are building up impressive and rapidly growing customer lists and say they are profitable or expect to be shortly.
Building on Expertise About a quarter of the e-Builder's 38 staffers also come from the construction industry, providing it with a broad base of construction knowledge and experience. E-Builder has several hundred customers and its customer base is growing at between 30 and 50 percent per year from direct sales and through strategic partners including McGraw-Hill who resell e-Builder solutions. The company is currently profitable and expects this to continue.
Book It TimeTrade has been offering its platform on an ASP basis since October 2000, but claims to be delivery-method agnostic — its larger customers (about 25 percent of its customer base) license and host the software themselves, while the smaller ones (accounting for about 50 percent of total revenues) receive it as a service. The company has a total of 150 customers, generating about $200,000 per deal from the larger customers and between $50 and $600 per month from the smaller ASP customers.
Profits from Nonprofits Etapestry itself was founded in 1999, and has since won about 1,500 customers that pay between $50 and $500 per month. The company expects revenues of about $2.2 million in 2002, selling through resellers, referral programs and directly to customers. The company is adding two to three customers per day, and expects to be profitable by early 2003.
Another good example of a specialist ASP with a high degree of experience in the industry is Houston-based Mirus Restaurant Solutions. A relatively small, privately owned company with 17 employees, Mirus operates in the restaurant and hospitality industry, offering Web-based restaurant reporting and information tools and hosted back office applications on a subscription basis, targeting chains with more than 50 units. Mirus's knowledge of the industry comes directly from its principals and management team, most of whom have worked in the restaurant and hospitality or retail industry. To date the company has had $10 million of funding in two rounds, and with 450 customers typically paying $150 per month the company expects to be profitable in the second half of this year.
An Air of Success OpenAir has 65 customers (with 8,000 end users) in its target market, typically paying $50,000 per year. OpenAir is unusual in that while ASP operations account for 90 percent of its business, it also offers on-site deployment of a server loaded with its software (although upgrades are managed remotely), and has partners including Jamcracker and Intacct who resell a version of OpenAir integrated into their own solutions. Last year the company's revenue increased four-fold, and after three rounds of funding raising $16 million since June 1999 the company expects to be profitable early next year.
Focus Equals Profits
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