ASP model: It's all wrong
- 14 March, 2001 16:41
The sales strategy behind the application service provider (ASP) model in Australia is fundamentally flawed, according to Paul Gleeson, director of ASP services at Unisys, as it has primarily focused on high-cost, low-margin mass-market offerings instead of customised enterprise services.
Gleeson, one of the founding members of the recently launched Australian branch of the ASP Industry Consortium, claims the obvious market for ASP sales has been abandoned in the rush to offer the service to small and medium businesses.
But the theory is not winning Gleeson the support of ASP industry consortium colleagues or other representatives in the ASP industry. "Small businesses are a very viable market for ASPs," said Michael Ellies, general manager of ASP Peakhour. "They will power the ASP model in its first wave, because the value proposition it offers to small business is very strong."
Gleeson claims mass-market players have been over-spending on infrastructure costs and marketing costs, and their moderate levels of success have dampened enthusiasm for ASP services. The problem, according to Gleeson, is the rigidity of the "pure ASP" model, defined as the offering of applications on a one-to-many scale on a rental basis. Gleeson believes the real dollars from the ASP model will be made from the value-added services offered.
"We need to be selling more than just a delivery mechanism," he said. "Its Business 101, but something our industry has neglected."
Kent Duston, chief executive officer of new wholesale ASP Cavillon Systems, agrees that there has been a lag-time in ASP growth, but does not agree with any suggestion that the pure ASP model is flawed.
"This is typically what you hear from the large vendors," he said. "What they are talking about is the outsourcing of people and resources, not ASP. They are just dressing up the concept of outsourcing with a new acronym."
Gleeson, however, predicts the commoditisation of such ASP products will lead to their eventual demise.
"The ASP industry cannot sustain itself with the pioneering companies in information technology and consulting services," he said. "Clearly, we need to get the enterprise guys involved."
Gleeson said the real money in the ASP industry would be made by those systems integration and outsourcing channels able to develop and deliver services around applications. Such services could include help-desk services and desktop support, reporting and monitoring services, backup and network management.
Despite their differences, what is clear from the strategies of Unisys, Peakhour and Cavillon is an increasing reliance on a channel model to distribute ASP services.
Photograph: Unisys' Paul Gleeson