There's no doubt that ASPs have their benefits: For example, instead of buying a copy of Intuit's QuickBooks for your accountant and loading it onto an office PC, you could subscribe to NetLedger's online accounting service. The program and data remain resident on NetLedger's servers, and rather than paying for the software, you pay for the amount of time you use it. The model works for something as simple as a PIM application [as offered by MyPalm.com (Web site)], as well as much more complex schemes. Buzzsaw.com (Web site), for instance, concentrates on offering business-to-business solutions for the construction industry. Companies can buy and sell products and services, as well as exchange blueprints, designs, and other data.
One obvious advantage to using an ASP is cost. While off-the-shelf software is affordable enough for most, there are a host of vertical-market applications aimed at particular types of businesses that are a stretch financially for some smaller companies. The ASP model gives such firms access to that software without their having to invest in a trained IT staff to install and troubleshoot it. In addition, with an ASP, users also always have access to the latest version of the software. If a developer adds features, for example, the upgraded version will be available the next time you log on.
But there are drawbacks; namely speed and reliability. A fast connection to the Internet is the ante for businesses that are interested in subscribing to an ASP. For its part, the ASP has to perform invisibly; which means flawlessly.
"Users won't put up with hitting the Enter key and waiting 4 seconds for something to happen," says Joel Kocher, CEO of HostPro, the country's third-largest ISP and a player in the nascent ASP arena. "That just won't work."
Then there's the worst-case scenario: Red Gorilla. This ASP, which provided online billing and other services to lawyers and small businesses, abruptly closed its doors in October 2000 without any warning, leaving customers without access to their data.
"They just pulled the plug," says Scott Yale, CEO of Officetool.com (Web site), the company that took over Red Gorilla's customer base and business after the latter filed for bankruptcy. "No one had any idea what was going on, and the users were totally left in the dark. They had no clue."
It took two weeks before Officetool.com could put Red Gorilla's database back online for the customers, luckily, with all their information intact. While most of Red Gorilla's customers stayed on with Officetool.com, Yale says he saw a 20 percent fallout from the experience. And that wasn't the only damage done by Red Gorilla's shutdown.
"I think customers are going to be more cautious in selecting another ASP," says Yale. "They have to really see who's been in business for a while. Just because you have investments from a VC doesn't mean you're going to have staying power."
In fact, research firm Dataquest says that of the 480 ASPs available today, 60 percent will be gone next year because of bankruptcy, lack of venture capital, or mergers. So if you are interested in using an ASP, pick a business that has a proven history.
Beyond the trust issue, another hurdle for the ASP market to overcome is application availability. For the most part, software still needs to be rewritten for e-delivery. "Today, you have software that's just not meant to be hosted," notes Kocher. "When all you need is a browser, that's when this thing will really take off".
