The early days of the application services business have been about new companies establishing a new idea, much as the dot-com retailers did for the whole Internet commerce thing.
Now the big companies that have long dominated the software and telecom industries -- and that see themselves as the natural heirs to the application service provider market -- are beginning to make some noise.
Case in point: a-Services, the Cable & Wireless unit launched last month in partnership with Compaq Computer and Microsoft. "Where we are today in the ASP market isn't likely to be where we'll be in the future," says Jeremy Thompson, president of Cable & Wireless a-Services in Houston. The next 12 months will be crucial to the development of the market, he says. "We absolutely believe that the model is unstoppable.
"This isn't the big, bad telephone company coming to stomp over the market," Thompson says modestly. "We believe that there will be a place for many providers, and we may work with other specialised ASPs."
Simon Angove, a-Services' senior manager of product development, says the next phase of market development won't be kind to some of the early leaders. "The ASP landscape will be littered with the bones of people who had a 'build it and they will come strategy,'" he says. More dispassionate observers also believe the big companies have significant advantages as ASPs. "The telephone companies will absolutely become a channel for services," says Janet Waxman, program director for systems and storage distribution channels at International Data "A-Services is a good idea, and an example of what's coming."
Aimed initially at the enormous small- and midsized-business sector, the a-Workspace platform from a-Services is starting out by delivering Microsoft Office 2000 and Exchange 2000. In the months to come, the company will add customer-facing applications such as customer relationship management and e-commerce software, as well as back-office tools such as procurement, human resources and financial applications.
Angove says the target market needs the ASP model because smaller companies lack the staffing and financial resources to get what they need on their own. "We are bringing trusted brands to the customer and giving them Fortune 500-level service," he says.
Identifying a market is one thing, but penetrating it is a bigger challenge. To get small businesses interested, a-Services is counting on its channel partners -- integrators, value-added resellers and consultants. "We don't disenfranchise the people who have already developed the market," Thompson says. "We make them our channel." Channel partners, which the company says will include household names in the industry, will be announced this year.
Waxman likes the distribution method chosen by a-Services. "The reseller strategy is key," she says. "They're the ones with the customer relationships." A-Services offers more than just applications over the Web. It's a true end-to-end service provider, from the data centre to the fibre network to the desktop, where customers get the latest Compaq network appliance and a 17-inch monitor. Users don't have to take the desktop boxes, but control of the entire network allows a-Services to guarantee application performance to the end user.
An early customer, Woody Rollins, president of Boston Corporate Art, says the service has allowed him to get his business into competitive shape immediately, without borrowing US$150,000 to do it all himself.
Packaging that kind of infrastructure and desktop hardware is playing the game at a level few start-ups can contemplate. "The investment required to position this business is a major deterrent to most companies," says Thompson, a Cable & Wireless veteran. A-Services is a silver-spoon baby, with US$500 million invested by Cable & Wireless and Compaq - including access to the British telecom giant's global infrastructure, and equipment such as Compaq servers and storage-area networks. Compaq Global Services group provides support and service.
A-Services will launch in the UK in October, and will be available in Australia by year's end. Customers on a 24-month contract pay US$169 per month per user for Office 2000 and US$189 for Exchange 2000. A per-user start-up fee is being waived for customers that sign up this year.
