The evolving ASP models
How would you summarise a successful ASP business model?
ASPs need to adopt the pure-play model, which is the only single robust model. This says all partners will remain in their area of core competence, work in a seamless manner, enter into a revenue sharing or any other commercially viable arrangement and own the customer.
What would you say is the biggest advantage of the ASP business over other IT service opportunities?
The answer is scalability. By becoming an ASP I have no geographical boundaries and I can scale up like anything. This is a big restriction with outsourcing services today.
The process of deploying applications on a remote server and making it available for enterprise users has a number of benefits. Which are the major market segments that can be early adopters of this technology?
ASP is a beautiful model when you look at small and medium enterprises (SME) and is working well in other parts of the world. The question is why is it suitable for SMEs? Now SMEs have not been able to afford or have not taken the initiative to afford or invest in a large application.
If you consider any of the large applications like SAP, JD Edwards, PeopleSoft, Ramco Marshal or any enterprise application in the world, you have to spend a few million dollars on full implementation which takes twelve to twenty four months. For the SME segment this is not a good proposition and they have been investing in applications of smaller size and value. Now even mid-size and large companies are adopting the ASP model. That's a big boost to the movement.
What about specific market segments and which applications are more suited for ASP delivery?
The private sector banks, financial institutions, IT-communications-entertainment, transportation, hospitality among others. In the Indian sub-continent these segments are lagging behind in IT enablement. There is a huge potential here. These segments are service oriented. Their mind set is outsourcing because someone is outsourcing to them. In all growth companies the mindset is tech savvy, employee focussed and multi-locational. If you provide them a service based on technology solutions they are ready to pay a premium. The applications are payroll, financial accounting, HR and related ones.
During the last few years we have seen and heard about technology vendors like Intel, SAP, Compaq and others taking the lead as ASP vendors. So, there has been considerable initiative and investment to make this service model work with the end user. Yet there have not been too many takers. What are the reasons for this?
Now in the entire learning process over the last three years, the major issue that was missing was the customer--nobody thought of the customer. The reason was the ASP initiative was taken up not by service companies but by vendors. The power of vendors is selling products, they have not been selling solutions. Now ASP is purely a service industry and you need to first understand the customer requirements. Then customers need to be trained on how you are doing it. That part was missing.
The first offerings in any ASP portfolio are office suites and other desktop applications followed by more critical enterprise applications. Do ASPs tend to deliver applications for a specific vertical segment or do they offer a much broader horizontal application segmentation?
Now desktop applications cannot be offered in an ASP environment. You have to write the applications again. I don't say that it is technically not possible--some companies in the US are doing it--but commercially a whole lot of work has to be done. Office suites in an ASP environment, sounds very good, but the application architecture is built for the desktop.
There are multiple ASP solution models evolving around the world. There are routine models with say a hundred applications available, which are not specific to any vertical segment. The other model is to offer applications for specific segments where you have domain knowledge and expertise.
Is web enabling an application also an attribute for ASP applications?
More than 95% applications are not written for the web. But there are many other technical requirements than just making the application web enabled. It has to have an inherent strength to work in an ASP environment--one to many. A single application used by many users, simultaneously and in an isolated and secure manner.
We have heard Citrix claiming that all leading ASPs use their application management products. But ASPs tend not to talk about Citrix as a key enabler of their services. Rather they say that Citrix is not essential. In the absence of Metaframe is there any other way that applications can be managed on the server?
Citrix is an ASP enabler. Citrix has lovely products, which help an ASP in a heterogeneous application environment to seamlessly talk to each other at the back-end. Band-width optimisation is one of the major advantages and the thin client-ICA (independent client architecture) environment is very good. It is a very effective alternative. But there are alternative ways of managing applications without Citrix.
The most critical and important factor for delivery of an ASP application is the architecture. It is very important. The reason why Citrix played such a big role in the ASP business was that 95% applications were not written in web language. And with Citrix they straight-away become web enabled--it's like magic.
If the application architecture is strong and robust, supports cluster and load balancing then it already has features that Citrix as a separate software package would provide. Unfortunately or fortunately, the earlier applications were not written in this form or capable of taking care of these needs that have arisen today. Future applications will definitely have these features built in and will not require Citrix.
