ASPs Partner Up

ASP patnering up with bigger companies for brand recognition and other benefits.

One would think that application service providers would be happy with their current high profile. But a number of ASPs are getting more visibility via relationships with larger or better-positioned IT providers.

Hundreds of ASPs have arrived on the scene over the past couple of years, hoping to snag a share of what is forecast to be an exploding market for hosted applications. Gartner Group's Dataquest unit recently projected the global ASP market will reach $3.6 billion this year, up from $1 billion in 1999.

And while ASPs report their name-recognition is on the rise, companies are not averse to sailing under another's colors. EYT, a spin-off of Ernst & Young, plans to parlay its past relationships into its present marketing plans. The company has alliances in place with both Ernst & Young and Cap Gemini. EYT officials maintain that leveraging those brands will open customer opportunities for the newly independent ASP.

The clout of a big-name brand is also a consideration in Mi8 Corp.'s alliance with AT&T. "There's no question that organizations like ours, which are emerging, benefit from the substantial infrastructure and branding" of a larger company, says David Castellani, Mi8's CEO.

Since Mi8 partnered with AT&T earlier this summer, the company has seen its sales-closing ratio nearly double. Castellani says it's difficult to isolate the AT&T arrangement as a factor behind the increase, but he believes the alliance is having an impact on sales. At press time, Mi8 was finalizing a 660-user deal, which Castellani says would have been difficult to win on a standalone basis.

Relationships offer ASPs much more than branding, however. As for Mi8, Castellani cites AT&T's infrastructure—specifically, its data centers, redundant OC48 connections and security. "We're not in the business of ... managing data centers," he notes.

Customer access is another plus. EYT expects to benefit from the reach of thousands of Ernst & Young auditors and Cap Gemini consultants. So, too, does Interliant, an ASP that will provide its Lotus Notes hosting services, and eventually other ap ps, through EYT. "They've got a wonderful channel," says Herb Hribar, Interliant's CEO, speaking of EYT's relationships.

Elsewhere, Agillion, an ASP that offers Web-based customer management applications, is teaming with MySoftware. Although MySoftware lacks the scale of AT&T or Ernst & Young, the company has considerable brand recognition in the small office/home office productivity software market. Agillion plans to leverage that recognition, embedding the Agillion service as a menu item within My- Software's products. Steve Guengerich, Agillion's VP of strategic partnerships, expects 80 percent of the ASP's sales to be driven through such indirect channels.

Call it the power of two, ASP style.