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End of the channel?

End of the channel?

Excuse me for being alarmist, but as far as I'm concerned the application service provider (ASP) model is THE biggest threat the channel will ever face.

It is very possible that this emerging trend could see computer retailers, resellers, integrators, and outsourcers all go the way of the dinosaur sometime in this next decade.

Am I being extreme? Probably, but as Intel's Andy Grove said: "Only the paranoid survive."

It's all too simple to dismiss the ability to access applications via the Internet as just a return to bureau-style computing. That model was superseded, so why would we return to it?

For one, there was nothing wrong with the model. Centralised computing is more manageable and therefore is more reliable. It also takes advantage of economies of scale and is therefore cheaper.

The only reason it went away is because the applications outgrew the infrastructure used to deliver it. Broadband Internet will change that. It won't be too far down the track before it will be possible to deliver even the most graphic-intensive games via the Internet.

At this point, which model makes most sense for a user? To pay for all that computing power and be responsible for its maintenance and continual upgrades, or to simply plug the thin-client appliance into the socket in the wall and pay less for "apps on taps" which work every time.

This week, we feature another article (page 4), which again states that small business is not very satisfied with its computing experience. It never will be under today's distributed PC model of computing because the cost-efficiencies simply aren't there. The experience is always going to be that they're paying a lot of money for something that never seems to work like it should.

Under the ASP model, computing is nothing more than another utility. You turn it on and it works.

For a limited time, there will be an opportunity for some in the channel to deliver these applications. Solution 6 is one Australian company looking to be such a provider. ServiceNet is looking to establish itself as a global ASP. But how large is their window of opportunity before the big telcos take over the market? They own the infrastructure so they can deliver it cheapest. And data communications providers are forcing their hand anyway, by eating into the telco's traditional voice market. They have to find other areas of revenue and what better space could there possibly be than becoming a computing utility?

Bill Gates has had a pretty good track record of picking industry trends so far. Over the last couple of months he has been making billion- dollar investments in telcos like AT&T and ComCast and is reportedly in talks with Cable and Wireless and Deutsche Telecom.

So if this ASP model plays out, where does it leave the channel? Hardware sales will all but disappear as the user owns little more than thin-client devices. Software reselling will disappear altogether as all software is paid for on a subscription basis and is delivered over the Net. Even the great saviour of services revenue will largely dry up because there isn't all that much infrastructure that will need servicing.

Under an ASP model, only Web development and consulting will be a significant revenue generator as companies continue to pay big bikkies (page 8) to Internet-enable their businesses and stay on the leading edge.


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