The ASP market

By Ed Sperling, Sm@rt Reseller Wall Street and a long list of venture-capital firms are tripping over themselves to get closer to the application service provider (ASP) market, but they're also starting to issue words of caution. If the initial entrants into the field do well, then funding will continue to be readily available until well into next year.

By Ed Sperling, Sm@rt Reseller

Wall Street and a long list of venture-capital firms are tripping over themselves to get closer to the application service provider (ASP) market, but they're also starting to issue words of caution. If the initial entrants into the field do well, then funding will continue to be readily available until well into next year. That, however, is a big "if."

The danger is one that comes with any new business model: It's untried, and there are always kinks to iron out. But the ASP model is unusually fraught with pitfalls because it relies on multiple players to deliver a solution in a way that's never been done before, and they all have to be working in sync every step of the way.

Companies jumping into the ASP market — including variations like total solution providers and commerce solution providers — supply a small piece of outsourced solutions.

App vendors such as Great Plains Software, for example, automate the business process that can be outsourced. Companies like Qwest provide the plumbing and the connection to make it happen. Distributors like Ingram and Tech Data look to manage the logistics and the relationships between vendors. And resellers and integrators will serve as the primary interface with the customer.

As time goes on, it becomes a fairly simple matter in any field to determine who's delivering on promises—and who's not. But in the ASP market, the speed at which business-process outsourcing—the underpinning of e-business—is adopted will depend on all of the players in volved in delivering an ASP solution. If things don't work out for highfliers like US internetworking or even Intel, there may be far less money to go around.

That could have far-reaching effects. Finding good partners that share a vision of the future isn't easy.

At the beginning of the century, companies like Ford were so hell-bent on getting all of the pieces to work together that they actually controlled their raw materials, the manufacturing process and the distribution of completed products. The ASP model is the antithesis of Ford's way of doing things.

In the new world order, everyone determines their core competency and delivers that slice of the solution. But the more players in the solution, the more room for error and the more chances this market isn't going to get off the ground quickly—or smoothly.