Locating survivors
But the key for Schoenegger and others is finding the ASP survivors. It isn't easy.
Pandesic told customers it would stick with them through the end of January, helping to bring Web site operations in-house, find another ASP or shut down. After months of trials and tribulations--including an effort by customers to try to keep Pandesic alive--Adidas got lucky.
A group of technology providers--including application infrastructure provider Allegrix; Enterprise Resource Planning software provider Cutsey Business Systems; e-business software service provider Progress Software; and United Parcel Service's warehouse distribution service, UPS Logistics Group--came together to bring up new Web sites in less than four months, with less than US$2 million. The new sites--The store.adidas.com and Teamsoccer.adidas.com--went live 19 January, just two weeks before Pandesic dropped support.
"We beat the high-voltage deadline," Schoenegger says. He had tested the site with live data, and so knew it would work. "But I still kept checking every five minutes in the beginning. And there were no complaints."
The new sites enable Adidas to easily offer a very complex array of styles, colors and sizes in a variety of merchandising scenarios. Customers can order and redeem gift certificates. And most importantly to Schoenegger, there is an automated close-to-real-time inventory update across all elements of Thestore.adidas.com. It is a capability that Schoenegger says was difficult to find. "We don't want customers clicking on a nice picture and finding nothing behind it," he says.
The Children's Place--a US$587 million retailer and another Pandesic customer--wasn't able to find vendors to move as quickly. The company shut down its site in mid-January, and is bringing it back in late April. Like others, The Children's Place is sticking with the ASP model.
Selecting vendors carefully
"Pandesic didn't completely sour us on the ASP business," says Mario Ciampi, senior vice president of store development and logistics at The Children's Place. The company still believes that someone else can do it better than its own information technology (IT) workers. "Clearly, our experience is not in e-commerce," Ciampi says. "It is in the traditional retail chain."
For its new site, The Children's Place has turned to Triversity, a Canadian provider of point-of-sale software that has been working with the retailer's brick-and-mortar business for three years.
"Now we're going back online with someone we have a history with," Ciampi says. "They've got financial capabilities outside of the e-commerce business, and they have a concern in keeping us up." Like others that have been burned by their ASPs, "we've been very, very careful in vendor selection now," he says.
But it's hard to be careful, and last year, when the ASP market was brand new, it was even harder. "There are a lot of posers out there," says Pradeep Khurana, chairman and founder of Surebridge, a full-service ASP for midsized companies.
With the early market rage, any company that could put the letters A-S-P together, got lots of venture funding and press. "They didn't even need to show a lot to get that attention," says Amy Mizoras, an analyst at IDC. But as the market shakes out, ASPs are being forced to prove their mettle, and many enterprises are diligently examining potential ASP partners. "It is just as if they were ready to purchase someone," Mizoras says.
For John Charters, president and CEO of Qwest Cyber.Solutions, that's good news. QCS bills itself as the largest enterprise ASP, and potential customers are usually impressed by the backing of parent company Qwest Communications International.
"QCS has very deep financial pockets, and a very big commitment from Qwest," says Joe Bologna, director of IT infrastructure and services at Expanets. A provider of networked communications solutions to midsized businesses, Expanets just awarded a five-year, US$22 million contract to QCS. "We were only looking for cream-of-the-crop companies," he says.
QCS has built up its strength by seeking out larger, established customers, not start-up, pre-IPO companies. "Now, we're glad we don't have 20 [percent] to 40 percent of our revenue as bad debt from companies that are no longer in a growth market," Charters says.
Other ASPs, such as 2-year-old Corio, are moving away from a focus on the dot-com start-up market. Early on, Corio had targeted the dot-com space, snagging such names as Excite@Home, Lycos and MadeToOrder.com. Now Corio, which is backed by Microsoft, PeopleSoft and Sun Microsystems, has changed its ways.
"For us, the biggest challenge has been the disappearance of the dot-com companies that fuelled our early growth," Corio's Kristofferson says. "Now, midsize brick-and-mortar companies and large enterprises are becoming our customer base." In fact, half of Corio's customers fit into that category. "ASPs just riding the dot-com wave are running into trouble," he says.
Corio appears able to move forward without seeking additional funding. Although it had a fourth-quarter net loss of US$19 million, Corio reported revenue of US$14.1 million, quintuple its revenue in the fourth quarter a year earlier. Revenue from application management services--the aggregate of the recurring monthly hosting fees, in which Corio sees the greatest opportunity--were US$6.8 million, up 57 percent from the previous quarter.
USinternetworking--though it gathered US$300 million in new funding, including a US$50 million equity stake from Microsoft, during the last quarter of 2000--hasn't done as well, but is working to shore up it strength. The company recently convinced AT&T to sell USi services to large enterprise customers. USi is trying to ink deals with other large telecom players as well.
Another ASP, eOnline, is going after large enterprises with the help of major consulting firms like Andersen and Grant Thornton, and more than 20 others. Those alliances have produced 70 percent of the company's business leads.
Jamcracker, the ASP headed by Exodus Communications co-founder K.B. Chandrasekhar, has an alliance with Accenture. The company has landed US$142 million in venture funding and more than 50 customers since its launch in February 1999.
