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Change Agent
March/April 2001

Marc Robins Tales From The Marketplace

BY MARC ROBINS


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 resources.

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 transaction-based fees.

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 mrobins@tmcnet.com.

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