A natural Progression

A natural Progression

ARN: A number of companies fit the description of application service providers today, but many models and variations of ASP seem to make it impossible for all of them to fit under the umbrella of one single definition. If there was a way of generically describing what it is that they actually do, what would it be?

Sowden: An application service provider (ASP) rents an application to a customer who is the user of the Internet. But the ASP model involves more than just renting an application - it is about the full management of the delivery of that service, the management of the infrastructure and everything that is required for that application [to run successfully].

All the end user does is pay an ASP and receives the application as a service. A lot of people think that an ASP is not really different from the bureau service and in many ways application service provision is similar to the bureau model. The biggest difference is that with the bureau, customers did not have an opportunity to be interactive, they couldn't go and interrogate their applications, their databases, their information. You couldn't represent your data in any way at all, you just dealt with the services [bureaus] provided.

How many Australian companies are currently paving the way for the ASP industry to emerge?

Well, we went out and talked to virtually everybody [that includes the likes of IBM, AOL, Citrix, Solution 6, Mincom, Telstra, Optus, etc]. In the cases where we haven't talked to companies in Australia, somebody in the US or Europe has talked to them to find out what they're doing. You can qualify what someone is or isn't doing very easily - if they haven't started to think through all of the implications, if they haven't been through the `oh, bugger' phase yet, then they're not yet doing it. It's all right to just rent [an application], but who is responsible for marketing, who owns the customer, who's responsible for a service delivery that doesn't happen. These are the central questions one needs to ask.

The only companies who are doing anything with any ASP standard are those that already have customers. Many others are just talking about getting their products ready [for ASP delivery], but they still have to convince their customers to rent. A lot of high-end consultancy-type houses are going to offer ASP services, but they're not going to be ASP providers.

Offering an ASP service to their customer base makes sense to these companies, but they're not going to be hosting applications.

In other words, they're not taking the `holistic' approach to ASP. Yet all of them are actually making noises [about entering the ASP market].

Are there any indications of how big the ASP market is at present and how fast it can be expected to grow?

Analysts have recently upped their estimates dramatically. GartnerGroup has recently released some figures predicting that the market could be worth $US20 billion in 2002. In the Asia-Pacific region, the application hosting market could grow to $US5 billion by 2003.

The interesting thing is that they say that the region is already lagging 18 months behind the US, which is funny considering that the market is only about six months old. What they're really saying is that Asia-Pacific won't be ready [for ASP adoption on a larger scale] for another 18 months.

The problem is that no one's got anything to offer yet. Anybody who is doing anything in this space is going through a quiet period internally, making it happen and managing the logistics of it.

What effect is the emergence of the ASP model going to have on the software industry and, especially, on software distribution? To put it bluntly, will ASP spell the end of the software middleman?

The middleman, the distributor of software, is under threat. I'm a distributor of software, that's what I do and I'm building the business that is paying plenty of attention to the distribution side at the moment.

As a distributor, you have to be very conscious that the ASP model has a momentum of its own and that nobody can stop it.

You have to make sure that you build new distribution models and arms that will ensure that you have a future.

In terms of application development, this will be a much easier channel for application developers to market their products. One of the most interesting things that we're already seeing happen is the loss of brand name. It's going back to that old question of who owns the customer and ASPs are poised to become the Microsofts of tomorrow. Microsoft is a good point. They're running scared because they've thrived and survived on their brand name.

Brand awareness is the key to their success and now companies like AOL will take that away. Sure, they might sell Microsoft products, but the brand-awareness will ultimately belong to them.

Where is Progress going to be in this space? Where do you fit into this picture?

At the moment, we firmly want to be the technology partner behind all of this. Everything that we do normally through the channel today we will do through the ASP channel for both our technology and business partnerships. Progress has no plans to be an ASP ourselves because it would detract us from what we really know. Firstly, we've only just recently learnt how to do effective business partnering and it would take us away from that.

And, secondly, we would have to learn a whole new skill set that we don't have, whatever that may be - distribution or service provision. For instance, we're not bandwidth managers, so Progress would have to basically merge with somebody else to make the real offering in that area.

So, who is that somebody?

At the moment, we're not allowed to do it, but yes, a merger would make an attractive proposition for me. But the view has been taken that whatever we do, we're going to do it consistently and globally.

If our headquarters in the US chooses to do so, they could either do it with us in Australia or take it somewhere else to test it. But that's if they choose to do it.

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