Despite the recent meltdowns in the general ASP industry, such as Pandesic LLC
and Red Gorilla -- and the near-death experience of USinternetworking, Inc. (www.usi.net)
-- not to mention the tales of doom being foretold by such research houses as
Gartner Group (www.gartner.com), which
predicts that more than 60 percent of the ASP market will crash and burn in the
next year, you would think the flow of capital into this technology sector would
simply dry up.
Granted, most of the analysts covering the ASP market were way off the mark:
Based on projections that the ASP market would be worth more than $6 billion by
the end of 2001, more than 500 companies were fueled by almost $10 billion in
venture capital. In addition to the high-profile crashes, many small startup
ASPs are burning through their capital, faced with the high costs of building
data and network centers and licensing software products.
Does this mean that all is lost? Not by a long shot! Rather than drying up,
money keeps flowing into the market, primarily because there are still plenty of
investors who believe that the market for outsourced and Web-delivered software
and communications services is still real and that the future of such services
is brighter than ever.
GOOD NEWS FOR CASPs
I recently was provided with an excellent and comprehensive ASP market survey
funded by the ASP Industry Consortium (www.allaboutasp.org)
-- the leading ASP industry group with over 750 members -- and conducted by Zona
Research (www.zonaresearch.com), which
provides a number of eye-opening findings that I felt I had to share with you.
The survey is called the "Application Service Provider Quarterly Tracking
Study," and it contains the results of a Web survey that included 137
respondents from a pool of senior and executive managers and IT professionals.
First, the most salivating findings came from questions related to the types
of applications currently being accessed from an ASP, and the types of
applications the respondents anticipated would be accessed from an ASP a year
from now. In terms of current apps, communications -- which include e-mail,
messaging, and groupware -- led the pack with over a third of respondents
raising their virtual hands. Next in line, in their respective order, were
financial and accounting, e-commerce, CRM, education and training, and human
More telling were the numbers based on anticipated usage. Communications
again topped the list, but this time with over 65 percent of those surveyed
indicating future adoption. E-commerce came in second, education and training
third, and CRM fourth -- all with roughly 40 percent of the respondents
indicating usage down the short road.
Other findings that were especially interesting include the factors that are
most important in influencing ASP purchase decisions. There appeared to be a
very small spread between the least important and the most important factors,
with the most important being that ASPs "enable you to focus on achieving
strategic business objectives," closely followed by "enables your
organization to more quickly implement new applications," and "frees
IT resources to focus on internal mission critical apps." All factors
listed were judged to be very to extremely important. However, the two least
important in the mix were "compensates for lack of internal IT
resources," and "reduces time-to-market" -- two market drivers
that are usually assumed to be the overriding factors in choosing an ASP.
Other important tidbits I want to share with you relate to who the primary
decision makers are in the purchasing process, and which type of suppliers
respondents would first contact when initiating the buying process. Executive
management (including CEOs, presidents, owners, partners, chairpersons)
accounted for 41 percent of the primary decision makers, with senior management
(VPs, general managers, financial officers, and CIOs) at 37 percent, MIS/IT/IS
personnel at 14 percent, middle management at four percent, technical staff at
two percent, and general administration at two percent.
In terms of first contact, an overwhelming 69 percent indicated they would
reach out and touch the ASP directly. This was followed by consultants, at 12
percent, network service providers (NSPs) at five percent, systems integrators
at four percent, ISPs at four percent, value-added resellers (VARs) at four
percent, and independent software vendors (ISVs) at two percent.
Other salient statistics include 52 percent of respondents would prefer to
pay a flat rate for their organization, versus 19 percent who would like to pay
per user per month, 12 percent for usage-based fees, and nine percent for
There is considerably more information in the Tracking Study that merits a
look-see -- much more than I have space for in this column. For information on
obtaining a copy of this research, and becoming a member of the ASP Industry
Consortium, visit www.allaboutasp.org,
or call 781-246-9321.
Marc Robins is Vice President of Publications, Associate Group Publisher,
and Group Editorial Director for Technology Marketing Corporation. His Change
Agent column will appear in each issue of Communications ASP magazine. Marc
appreciates your feedback, and may be reached via e-mail at firstname.lastname@example.org.
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