Commentary: Why ASPs will not die

By Kwa Kim Chiong
CEO and founder of justLogin.com

The bursting of the dot-com bubbles have spawned several articles and commentaries regarding the demise of Application Service Providers (ASPs).

What we have seen happened to dot-coms and ASPs are temporary and a result of the market correcting itself.

However, to say that ASPs will go the way of the dinosaurs may be presumptuous.

As reflected in an IDC report, the ASPs growth is inevitable in the new economy. In a latest research report released by IDC, it is predicted that the ASP market will grow to US$7.8 billion by 2004 from US$298 million in 1999.

What we have seen happened to dot-coms and ASPs are temporary and a result of the market correcting itself.

In a recent report, Gartner predicated that 60 per cent of all ASPs will no longer exist by 2001. This prediction is not entirely new because we all know that in the brick and mortar world, only 1 or 2 new business ventures out of every 10 will survive. ASPs are no different from any other business ventures, hence the statistic applies.

The key question then, is who will be the global ASP of the future, and when can we expect so see this happening?

Successful global ASPs will have a couple of things in common:

1. Products and/or services that allow companies and individuals to do things better than the old way.
2. A strong Internet based customer relationship - personalized and customized with active dialogue and interaction.
3. Global Accessibility - anywhere, anytime and any mean (WAP, email, phone, call centres, etc).
4. Strong alliances with other members of the interconnecting e-community.
5. Internal corporate culture of continuous enhancements, improvements and innovations.

The list is not exhaustive but I believe these are the top five success factors for any ASPs or dot-coms. ASPs who are able to deliver on all the 5 counts will prevail.

The technology debate
On the technology front, the debate still rages on regarding feasibility of the ASP model.

I will be the first to admit that there is a performance threshold that companies and individuals will tolerate.

The speed and performance of the pipe linking companies to external ASP sites has been raised many time as the key issue. Well the issue here is not to compete speed against speed or performance versus performance against traditional in-house application hosting model, it is about competing on the total cost of ownership front. I am not saying that performance and speed is not important. In fact, I will be the first to admit that there is a performance threshold that companies and individuals will tolerate.

However, exceed that threshold and you are in the game. And with the total cost advantage that ASPs offer, you will have a strong business proposition.

Bandwidth availability is on the rise but it varies from country to country. In Asia for example, Singapore and Hong Kong are certainly in the forefront. Malaysia already has a fibre optic network backbone across the country and other countries are in various stages of implantation. In addition to infrastructure availability, data transfer technology such as DSL and ADSL and high-speed wireless networking are all contributing to the realization of the ASP model. So for now, ASPs will work in some places and instances but not in others.

What about now?

What we are experiencing is an evolution of the enterprise computing models. Today we see hybrids of externally hosted and locally hosted applications. For example, an office application ASP, is usually a suite of different applications brought together to deliver better productivity.

A hybrid model would mean that applications such as word processing will still be locally hosted while more collaborative applications applications such as scheduling, communicating, workflow, etc will be hosted externally.As the bandwidth increases and technologies mature so will external hosting of applications.

ASPs are an evolutionary business that provides flexibility and helps solves people and IT implementation and management problems.

The goal is to bring the ASPs up to speed on performance to an acceptable level where cost of ownership becomes the key decision criterion.

ASPs provide access to powerful new applications, at a fraction of the heavy costs incurred in licenses, hardware, support staff, and other costly and scarce resources.

Kwa Kim Chiong is the CEO and co-founder for justLogin.com. Prior to justLogin.com, he was the deputy general manager and director of operations for Singapore Engineering Software (SES).

In his tenure as head of IT in Defence Science Organisation (DSO), he turned the company into an "intelligent enterprise", pioneering the development of electronic workflows, procurement and project management systems.

Kwa holds an MBA and an honours degree in Electrical Engineering from the National University of Singapore.

About justLogin.com
justLogin.com, headquartered in Singapore, is an application service provider offering an office collaborative applications suite for the business community. The applications-on-tap makes it easier for companies to conduct internal surveys, apply leave, manage office resources, post announcements and news, task scheduling, maintain personnel directory, communicate, and share information.

Justlogin.com was a finalist in the "Killer Application of the Year" category in Internet World Asia Industry Awards 2000.