January 2000

BY JIM MACHI

It seems all I hear about lately is the idea of application service providers (ASPs) changing the way companies buy their Internet-related services. Being the genius I am, I figure if this ASP idea is really a good one, Internet-related services will someday include Internet telephony-related services — spurring even more growth in our not-so-little-anymore industry. I have decided to conduct a check just to see whether I live in some sheltered Internet telephony world, or whether this ASP idea has taken off beyond the cave where I live.

ASPs — ASSOCIATED SURFING PROFESSIONALS?
To get my bearings, I first went to the AltaVista Web site  and searched for “Internet telephony,” since I know this is the hottest topic in the world — right? (Why else would you be reading this magazine?) I found 47,285 pages, including good information on topics like gateways and rate arbitrage. Next, I searched for “ASP” and found 1,768,419 pages. That’s a lot, so I figured there are probably a lot of different things with “ASP” in them, bloating the number of pages I found. I went deeper into the information to double-check. While many of my results were about the ASPs I was looking for, there were also matches in which ASP stood for automotive service professionals, active server pages, Astronomical Society of the Pacific, and just about anything you could think up with those initials. I figured when I searched for “application service provider” I’d get quite a different number. And I did. But the number was still amazing to me: 2,891,825 pages, an increase of 64 percent over the more generic ASP! And all this information was about the ASPs I was looking for.

That’s not the only proof that ASPs are a hot topic. A scan of September and October press releases shows Microsoft making a large investment in USWeb/CKS, Intel launching Intel Online Services, and Oracle announcing Business Online.

The bottom line? Software and service are becoming one and the same. And it looks like the industry giants think ASPs are real and here to stay. With that assumption in mind, let’s explore what it will mean for you.

A GOOD FIT FOR INTERNET TELEPHONY
First, take a step back and look at ASPs in general. IDC, which claims to have defined and coined the term ASP, defines ASPs as “service firms that provide a contractual service offering to deploy, host, manage, and lease what is typically packaged application software from a centrally-managed facility. Customers gain access to the applications through the Internet or dedicated leased lines.”

From this definition, it seems ASPs would be a good fit for Internet telephony, since Internet telephony already uses the Internet or dedicated leased lines. Also, 1999 saw a significant movement toward true telephony applications (as opposed to switching gateways) in the Internet telephony space.

But let’s not jump to conclusions. Before we can make a business case for Internet telephony ASP use, there are some hurdles to overcome. First, research into which applications are being touted for ASPs shows database-type applications like human resources, payroll, project management, and e-commerce. Also, there is some resistance in medium-sized and large companies to outsourcing anything — let alone telephony applications — to ASPs. It is also noteworthy that these companies have been slower than other sectors in the Internet telephony market to move to Internet telephony gateways in their CPE environment. So, while the march to ASPs is inexorable, there may not be a crossover right now between Internet telephony and ASPs.

Even so, messaging and telephony applications are coming. Usinternet-working, one of the ASP pioneers, offers messaging via Microsoft Exchange. This is a great idea right now, especially for small businesses that want to start doing business via the Web but don’t want to, don’t know how, and don’t want to know how to set up an e-mail server. They just know they need it, since they see their kids doing e-mail. Just think — tonight you can e-mail your order of 10 dozen donuts to the nearest Dunkin’ Donuts and it could be waiting for you at 6 a.m. as you drive to work! It’s easy to envision this service expanding to voice mail, fax, and other telephony applications for these small businesses.

Whether those services happen via Internet telephony or traditional telephony is probably just a function of economics and quality of service. We all know who wins on that score, so Internet telephony looks like a good bet to get a foothold into the pioneering ASPs who branch into telecom — what I refer to as ATSPs (application telephony service providers).

Furthermore, high-end ATSPs will also offer these services to medium-sized and large companies. Additional telecom services in this segment will include services found in public network IVR systems like voice mail, conferencing, and natural language speech services, for example. It’s easy to envision smaller businesses succeeding by feeding to medium companies, and some pioneer medium-sized companies reaping benefits like saving money.

These success stories will be driven by the guaranteed performance and uptime levels, ease of maintainability (just think “automatic” upgrades and data backup/recovery, and predictable costs in terms of a standard monthly fee). So, if you want to be a pioneer, this is your chance. The question is not if it will be successful, but when. If you are an ITSP, there is potentially a greater market ahead if you branch out and become an ATSP. And if you are a small or medium-sized business with a certain problem to solve, the ATSPs might just be your answer.

ASPs ARE HERE
You may be reading this and thinking “Hey, I’m already an ASP, since I kind of do this stuff. I just didn’t know I was called an ASP.” Now you do — and you can go create a business plan and watch your stock price rise. Take the market. Become an ATSP. And the next time I do a search for ASP, I’ll look forward to not finding “actuarial statistical paradox” among the top 100. c

Jim Machi is director of product marketing, Internet Telephony, for Dialogic Corporation (an Intel company). Dialogic is a leading manufacturer of high-performance, standards-based computer telephony components. Dialogic products are used in fax, data, voice recognition, speech synthesis, and call center management CT applications. The company is headquartered in Parsippany, New Jersey, with regional headquarters in Tokyo and Brussels, and sales offices worldwide. For more information, visit the Dialogic Web site at www.dialogic.com.