www.aspnews.com/trends/article.php/2228231
By Paul Rubens June 26, 2003 If you think it's hard for application service providers to work out their business strategies in a market that seems to change by the week, imagine how much harder it is for the companies that supply infrastructure software to these ASPs. Two years ago there was a whole raft of vendors supplying application delivery platforms, automatic provisioning software and billing systems to the ASP market, but this market has shrunk dramatically in recent months. To survive, they have been forced to alter their business strategies radically, and two key themes emerge: many of these infrastructure software companies are now targeting the large enterprise market with their products, and many are now concentrating on providing software to assist the provision of just one product: Microsoft's Exchange messaging platform. A typical example is Xevo, the Marlborough, Mass.-based service management platform maker. Almost exactly three years ago it launched its ASP Workbench, which it hoped ASPs would use to deliver complex applications from Great Plains (now part of Microsoft), Onyx Software and others. But today Xevo is readying itself for the release of XevoWorks 4.0, an application specifically targeted at large enterprises for role management and the administration of Active Directory and Microsoft Exchange. "It's safe to say that whatever ideas we had for how fast the (ASP) market would grow were not realised," Hal Chapel, president and CEO of Xevo, told ASPnews. He attributes this to ASPs offering the wrong types of applications. "We always felt the right apps would be highly configurable, high volume ones, and Exchange fits that perfectly." Another company to have changed its strategy in the light of the falling number of large ASPs is Halifax, Nova Scotia-based provisioning software company Abridean. "Application infrastructure providers have recognised that their software is just as applicable in the enterprise market place as in the service provider marketplace, and in fact about half the companies that have developed an enterprise strategy have dropped the service provider model altogether," Sean Sears, president and CEO of Abridean, told ASPnews. Abridean is still actively pursuing the service provider market, but two thirds of its revenue now comes from the enterprise market, he says. Supplying software to provision Exchange accounts for well over 90 percent of Abridean's business, according to Sears. "The large telcos are entering the service provider space, but they are not hosting ten different applications -- just a high-end email product, so business is all about Exchange and Notes at the moment." MetraTech, a Waltham, Mass.-based XML billing software maker, is unusual because despite the fact that many of its ASP customers went out of business over the last two years, it has moved "up market" rather than down towards the enterprise: revenue from Tier 1 service providers has increased from 10 percent in 2001 to 60 percent at the end of 2002. One way the company has achieved this is by modularizing it product -- enabling customers to cherry-pick the parts of MetraTech's MetraNet product they need to enhance their existing billing systems rather than requiring them to throw out their entire systems and deploy MetraNet from scratch. About 30 percent of MetraTech's Tier 1 service provider customers buy individual MetraNet modules. But it is perhaps a sign of the times that MetraTech is now looking to pick up additional sales from enterprise customers as well -- for what is after all a high-end billing system. Scott Swartz, MetraTech's president and CEO, says the company will target enterprises which want to bill for content that they wish to expose as a web service and charge for, and companies who need a billing system for internal revenue distributions and corporate back charging. Glenn O'Donnell, an analyst at Stamford, Conn.-based research house Meta Group says that overall the market is moving towards larger vendors, but believes there will still be room for the smaller players. Provisioning software providers are particularly likely to do well, he says. "Provisioning (software) is likely to be successful going forward. The trend is for the development of adaptive, self-healing software, and the automation of everything," he told ASPnews. Companies are concentrating on Exchange because it is the easiest application to address, he says. A criticism of many infrastructure companies has commonly been that their product prices are too high for many service providers to afford. Now that the enterprise market is also being targeted this criticism has become more relevant, and there are signs that it is being addressed by more flexible pricing or, in the case of MetraTech, by enabling customers to bolt on modules rather than offering only the entire product. The big question is whether the changes that these companies have carried out will be sufficient to ensure that they survive and succeed. None of the companies mentioned above have yet made a profit, although Abridean expects to become profitable some time this quarter. And although MetraTech is targeting business customers, it has not yet signed any up. The next few months are likely to be very important ones indeed for companies in this sector. |