In a move being met with much scepticism, EarthLink, the United States' second-largest ISP, will become the first of the big consumer-based Internet service providers to venture into hosted applications when it tests a service for small businesses later this year, company officials said.
The ISP will start by offering business management tools for SFA (sales force automation) and CRM (customer relationship management) to its 190,000 Web hosting customers, according to EarthLink CEO Garry Betty. Hosting of Microsoft Office will be available next year.
The company is banking on small businesses' need for inventory, sales lead and human resources applications. Those businesses, according to Betty, often lack the money to invest in private networks. Depending on customer reaction, EarthLink might extend the offer of hosted applications to its nearly 5 million consumer subscribers, he said.
"We see ourselves as aggregators. We aren't going to be in the business of creating things ourselves," Betty said. EarthLink will partner with an existing "up-and-coming" ASP for applications expertise, he said.
The moves are raising hopes for some, eyebrows with others.
Amy Mizoras, an analyst with International Data, said enhanced services such as application hosting are a good way for ISPs to stand out from the competition and maintain customer loyalty.
But fellow IDC analyst Steven Harris said, "It's jumping the gun. It's going to the endgame instead of offering a solid business plan."
Officials at AT&T's WorldNet service and Juno Online Services seem to agree. Both ISPs have plans to host applications but not for two to three years, when broadband access is more prevalent.
According to Scott Ellison, vice president of business development at Phoenix Networks, a DSL provider, customers used to multitasking will find a dial-up connection much too slow. "It just doesn't add up. You're going to create more of a customer service issue in the long term," Ellison said.
Even at Microsoft, which is planning hosted small-business application services through its .Net program, real launches won't happen until 2002, said Steven Gug genheimer, director of consumer strategies for Microsoft.
Meanwhile, officials at Personable.com, a small ASP (application service provider) that began publicly offering Microsoft Office and other applications to small businesses in April, said the ASP market has enough room for everybody.
Personable.com officials said EarthLink's moves validate their business. "Our service functions pretty well at 56K [bps]," said President Alfred Haddad. The company announced a resale deal with the office supply chain Staples last week.
"A lot of things are dependent on how well they do it," said Doug Gil martin, a manager at DSL (digital subscriber line) provider Covad Communications Gilmartin said he uses Microsoft's Excel and Word programs over a dial-up connection to Personable.com's service, but only when he's at home or on a business trip. "It would be hard to do on a regular basis," he said.
Only about 10 percent of EarthLink's small-business users have broadband access. "I think we're going to be very successful doing this," Betty said. "Success is learning about what it takes to offer the products and position them. Success is learning what the people want to use."
Steve Jolly, a small-business owner who's currently moving his hosted Web site from Verio's service to EarthLink, uses a hosted Windows version of FrontPage 2000 on his Macintosh system.
"There were a couple of bugs, but after a day with some support, we got it working quite satisfactorily, even at 56K [bps]," Jolly said.
