Progress Software is one of a growing number of organisations in the industry that strongly believes the ASP (application service provider) model deserves a thumbs-up, and is the right way to progress for business applications. Not a bad move, especially when analysts have predicted this market to be worth $US19.5 billion in 2003.
The ASP concept is such a huge force that it is driving many of Progress's initiatives in product development, according to the company's president, Joseph Alsop. Progress provides organisations with products and services to build Internet-enabled enterprise business applications that automate internal, business-to-business and business-to-consumer sales, service, and operational processes.
But adopting an ASP business model could dilute a company's revenue stream.
"If you are an ISV (independent software vendor), and you start renting, it diffuses your revenue and your stock takes a nose dive," said Steve Mills, general manager of software solutions, IBM. "I don't think a lot of software vendors understand this model. It has a long way to go."
Progress disagrees.
"We don't look at (ASP) as a dilution of revenues but an additional channel that will get you into markets you couldn't get to before," said Dave Ireland, vice president and general manager for worldwide field operations, Progress.
Organisations that take the ASP path can glide their way into the realm of startups and small and medium enterprises, businesses that lack the resources to purchase expensive enterprise-class applications, and acquire IT expertise, Ireland explained.
But the ASP mould will not replace the traditional purchasing model, Ireland stressed, noting that research firm International Data Corp. predicted that by 2003, the latter will still dominate 75 percent of the business applications market.
Rather, it can be a "mix-and-match" where businesses will decide whether "to build, buy, or subscribe", he said.
Where and how to mix both "subscribe" and "buy" models will depend on a variety of issues such as the nature of the applications, the capacity and skill level of the organization, and the type of users involved, he explained.
"Providing an application subscription offering, in addition to purchase, is a must to ensure revenue growth," said William Trail, director of ASP business unit, Progress.
But while the ASP path appears appealing, it could put a strain on the host providers that have to build and manage a data centre and cope with higher customer demand, delivering services that are highly secured, highly reliable, and available 24 hours by 7 days.
"I agree that the requirements of ASPs are important and of high priority, but I don't think that's going to be upsetting to ASPs," Ireland said. "They are expecting that, and know that it's going to be part of the game. The ASPs I've run into are aware of this, and have been pushing 24 by 7 status, top security, and high availability."
But while ASPs remain unruffled by the high requirements, the additional option for buyers to rent rather than buy will be "upsetting" for the application vendors, he said. And although these application suppliers can also go on the ASP road, Ireland recommends that they focus on simply providing the software.
"The application vendor is most well-equipped to sell," he said, and should partner ASPs, or create a separate business unit to focus on providing hosting services.
"You need a separate team of people because it's a separate issue," he added.