Local ASP Peakhour has scored a $12 million investment from O2e, a business unit of the National Australia Bank. As part of the deal, several of Peakhour's offerings will be made available to NAB's large SME customer base under the "National" brand.
After several months of negotiations, O2e will be offering NAB business customers an integrated Web suite of applications ranging from Internet banking, free e-mail, Web site building and e-commerce capabilities, to a host of business applications, all rented via the ASP model. The 350,000 SME customers that the service will target will have access to a variety of Internet banking and business tools, all under a single bill with one point of contact for support.
O2e invested $10 million in the Peakhour parent company and $2 million in its Australian subsidiary to further the development of the service, which is expected to launch in November. The deal also involves O2e gaining a seat on the board of Peakhour.
For the NAB, it is a chance to offer its small business customers value-added services above online banking, while retaining customer ownership under the "National" brand. For Peakhour, it is a chance to make wholesale returns from NAB's customers.
"We should capture as much as $3000 a year from each of these customers", said Peakhour CEO David Harrington. "With a base of 350,000 customers, you do the sums."
While the O2e deal is a major win for Peakhour, its existing partners and customers may see the wholesale arrangement as somewhat of a clash. Harrington is ambiguous on the issue, claiming there is both a "potential for contention" and that "there is no real difficulty in having these two channels working side by side".
As to which arrangement he would prefer in the future, Harrington was more concise. "We are indifferent as to whether we take a customer through a retail or a wholesale arrangement, except that we have to pay sales and marketing costs for each retail customer, but with wholesale deals like this, the National already has the customer."
Aside from the cost savings of wholesale dealings, Harrington also hinted that this deal was not exclusive to O2e and that Peakhour may offer a similar relationship with other major retail banks in coming months.
Harrington boasts that the deal is a blue-chip endorsement of the ASP model, and of Peakhour's dominance in the space. While the infancy of the ASP model leaves many industry players wondering what differentiates a pure-play application service provider from being merely a glorified hosting provider, Harrington sees such an arrangement as a sign that small-to-medium enterprises will finally embrace the model as a smarter means of sales and distribution.
"SMEs have their hardest time with technology, so outsourcing makes a lot of sense to them. The perfect candidate for an ASP customer is a company with under 100 staff, and no IT manager or network manager. Many of the National's customers fit this category. Customers usually begin with something low-risk, like e-mail management or hosting, but over time they gain confidence and migrate to services that are feature-rich, like financial management."
Harrington will continue to seek private funding for Peakhour, considering it a more stable way of financing the company than listing publicly, and expects to announce similar deals in the near future.