The Web-based service your small business leans on today could be gone tomorrow. And maybe your profit margin -- or entire enterprise -- will go too when that prop's knocked out.
A gloomy report from the Gartner Group, a Stamford, Connecticut research firm, says that a "brutal consolidation scenario" is in the wind for the application service provider (ASP) market. ASPs, which deliver software as a service over the Internet as an alternative to shrink-wrapped CD-ROMs, are among the hottest topics in computing, especially for small businesses. Why? Because an ASP shoulders the kind of work that most small businesses are simply not cut out to handle, like hardware maintenance, updates, and laying down networks.
Rather than spend thousands on a top-flight custom accounting package, the ASP theory goes, small businesses just "rent" the software on a per month, per user basis. Access to the software (in this case, the accounting program) is as close as the nearest computer with a browser and a connection to the Web.
Today, says Gartner, there are 480 ASPs. By the end of 2001, 60 percent will be his-tor-ee, buried by bankruptcy, absorbed in mergers, or starved to death when they run out of venture capital cash. A recent example: Pandesic, an e-commerce ASP backed by Intel that tossed in the towel this July. And Corio, which hosts services from human resources to messaging, has lost four times more money than what it's brought in this year. "Today's dot-com collapses will pale in comparison to the effect that the pending ASP meltdown will have on organisations that use these ASPs," says the report. Whoa.
How can you protect yourself against this impending implosion of outsourcing suppliers? You could steer clear entirely of ASPs, but the cruel fact is that some small businesses need ASPs to grow. If you face a choice between no-growth and entrusting core responsibilities to an outsourcer to help your business boom, the decision is a no-brainer: you go with an ASP.
To keep disaster from the door, you need to make some smart choices. ASP, yes or no? And if the former, which? And once you pick, what can you do to bounce back if the ASP surrenders to market pressures and drowns? I've collected five criteria that you should keep in mind as you make these decisions, and recommend one as the smart choice for small businesses.
