[ ASP news ] [ publications ] [ forum ] [ about us ] [ directory ]
[ ASP news ] [ publications ] [ forum ] [ about us ] [ directory ]
|
NEWS FEATURE
Apr 14th 2000: Leading Internet service providers (ISPs) and information technology services (ITS) companies believe there is big money to be made hosting enterprise-class applications, particularly for prosperous midmarket businesses and well-funded dot-com startups. But providers who want to be top-notch players in the ASP market are recognising they need to build up new strengths if they are to compete. Hence the current acquisition of ITS business Metamor Worldwide by leading ISP PSiNET for $1.9bn in stock. John Scott, PSiNet's senior director of managed applications, told ASPnews.com that there are six distinct business segments converging on the ASP marketplace. "First, there are the ISVs, and they understand the distribution channels are changing so they are pursuing partnerships to deliver their goods. Second the telcos - including the RBOCs, ILECs and ISPs - are pairing off to set up delivery services," he said. "Then there are the traditional Web hosting firms, the systems integrators, the Web development shops and the equipment manufacturers. Just like PSiNet's analysis envisioned the shift in the ASP paradigm, everyone is recognizing the change," he explained. One set of competencies that ASPs require plays to the strengths of ISP and hosting businesses such as PSiNet. An ASP must have the capacity to run mission-critical applications, which means enterprise-class data centers supported by a strong network infrastructure for Internet transport. But ASPs also need application skills, a talent that ISPs have traditionally not been keen to acquire, except in Internet-specific niches such as electronic commerce. IT service providers bring skills in operations management systems that can support application hosting. They also have the integration skills to set up and run the applications to match customer needs, including linking existing legacy systems with the Web where necessary. But simply bringing two sets of skills together may not be enough to build a successful ASP proposition, believes Steve Dryden, senior vice president of strategic development at Agilera, the new ASP venture set up by IT services company Ciber and Web hosting company Verio. The ASP market is feeling the heat from both convergence and consolidation because there are two different ASP business models at work creating a much larger shift in the market, he told ASPnews.com. "There are IT-centric companies like Ciber and telecom-centric companies like PSiNet embracing the ASP market," said Dryden. "Telecoms [companies] think of the ASP market as a commodity, so they tend to go after volume. Agilera thinks that integration is the key to success. As an ASP we have to use the right tools to make complex applications work together for brick-and-mortar vertical markets." Formed out of Ciber's existing application outsourcing division together with $45m backing from Verio and a venture capital ally, Agilera already boasts a substantial customer base including furniture retailer Heilig-Meyers and aircraft manufacturer MD Helicopters. Dryden said the need to keep pace with technology and business change means that businesses will turn to ASPs that adopt an IT-centric business model. "There is a fundamental shift taking place. Businesses are not able to keep up with all the software changes," Dryden said. "Technicians need a way to help their companies compete more effectively. So they focus on operating internal liaison tasks, while ASPs become the accepted method to provide mission-critical integration between converging technologies." Dryden believes this will force providers to work so closely with customers that they will need to become experts in specific vertical industry segments. Effectively, they will simply become a new generation of IT service providers, with remote hosting becoming just one of a number of behind-the-scenes services. In Agilera's case, its backer Verio will provide networking and data centers, leaving it free to concentrate on providing ASP services into its chosen vertical markets. "Within 12 to 18 months ASPs will go away," Dryden said. "Verticalization will narrow the focus down to remote hosting services for ASPs. Then it just becomes business as usual." But while PSiNet's Scott concurs with Dryden that there is an ASP phenomenon at work in the marketplace, he contends that it is the advent of Internet networking and infrastructure that is fueling the market shift. "Companies have recognized the Internet's intrinsic ability to reduce costs and drive profits," he said. "There's a myriad of reasons why ASPs are not a fad, but more of a paradigm shift in the market." PSiNET is in its quiet period until the Metamor acquisition is completed, so Scott was not able to elaborate on its plans after completion. But it is apparent that the global infrastructure provider purchased the ability to integrate backoffice applications in order to maximize the potential sales channel for its network infrastructure and Web hosting capabilities. It hopes the Metamor deal provides the key to unlocking the ASP market with application integration services and customized e-commerce and ERP offerings. For PSiNet, dominating the ASP market is all about volume, and lots of it. Report by Patricia Fusco, InternetNews.com
|
ON OTHER PAGES
|
