the Struggling Economy Mean New Life for ASPs?
years ago, the ASP (application service provider) model burst onto
the infotech scene and made quite a splash in an industry that was
already awash in splash. Getting software via an ASP, aka "Web
application hosting," allowed a user to "rent" a
particular application instead of purchasing it. Among the touted
benefits were low-cost access to high-end applications and a minimal
level of integration and configuration. Sometimes these promises
actually did materialize, but we will get to that part of the story
in a moment.
traditionally have appealed to smaller companies with tight budgets,
although firms of every size have incorporated hosted applications
into their IT infrastructure. Now, though, as the economy slows,
companies that once dismissed ASPs are giving such models second
and third looks -- especially if they are in the market for a CRM
makes a lot of sense to at least evaluate an ASP opportunity,"
Aberdeen Group research director Denis Pombriant told CRMDaily.com.
Pombriant is the author of a major Aberdeen report set to be released
shortly, called "What's Next in CRM."
these days everyone is looking for return on investment [ROI]. An
ASP can get you a positive return that much quicker," he said.
about any application can be and has been hosted, ranging from ERP
to supply chain management to Microsoft Office to e-mail. CRM has
always been part of the mix. But a new trend is emerging among CRM
ASP vendors, Pombriant said. In a white paper released earlier this
year, Aberdeen called this trend "the Enterprise Subscription
Service (ESS)-CRM model."
ASP market is bifurcating," Pombriant said. On one side are
conventional CRM vendors that license their software in addition
to offering it as a hosted application. These vendors include Oracle,
Onyx, PeopleSoft, Pivotal and Siebel.
vendors, however, usually do not offer their products through a
traditional license -- they are provided as a service through a
Web site, according to the Aberdeen report. Also, while a user can
configure an ESS-CRM Web site, it cannot be modified at the source
code level and thus cannot be customized.
applications "tend to be installed in a matter of weeks and
have a lower price point and lower cost of ownership than a conventional
hosted application," Pombriant said. "If a company really
has to watch its pennies, these applications are worth a look."
Indeed, per-seat prices can be as low as US$30 per month, Aberdeen
the companies cited in Aberdeen's report are Agillion, Eturn.com,
Neteos, Sales.com, Salesnet, Salesforce.com and Upshot.com. Until
recently, many, if not most, of them were very limited in their
functionality, concentrating on sales force or marketing automation.
However, Pombriant said a lot of these vendors now are repositioning
themselves for a broader market.
of them are releasing other customer service modules. Others, like
Salesforce.com, are repositioning themselves to encompass more CRM
functions," he said.
benefit of accessing an IT application at a price that is lower
than many consumers' monthly cable bill is inarguable. However,
there are reasons why most companies still install enterprise software
instead of hosting it with a software provider or a third-party
reason is that costs may be lower, but they often are not as low
as companies initially expect. Total cost of ownership actually
can be much higher, and, in some cases, less clear at the beginning.
Some ASP vendors might offer an application for, say, $100 per month,
but they might not include hardware, telecom fees or configuration
costs in that price. Indeed, some ASP vendors do not offer any connectivity,
leaving companies to negotiate separate agreements with their telecom
there are consulting and implementation costs. Many times these
can actually eclipse subscription fees. As for the easy and quick
installation benefits of ASPs, they are just myths. If an application
-- for example, a sophisticated ERP or supply chain product -- requires
a long time to be implemented in the traditional manner, it will
take just as long in an ASP environment.
To Look For
ultimately, an ASP is still a bargain. "At the end of the day,
an ASP is a good deal for a company that doesn't have as many resources
to draw upon as it did a year ago," Pombriant said.
is especially true at a time when new applications enter the market
one day and become de rigueur business functions practically the
next. "An ASP allows an organization to get into the CRM game
and be competitive at that level," Pombriant added.
the same time, the latest generation of ASP users can benefit from
lessons learned by early adopters. Service-level agreements, for
example, are very important, especially if more than one company
is involved in providing services. SLAs define who is responsible
for what, when and at which cost, ideally in every possible circumstance.
Some of the earliest adopters paid little more than cursory attention
to these contracts. Now, we know better.
are some of the elements users should expect to find in a good ASP
Provisions for guaranteed online availability and a set number of
consulting hours should be available.
contract should include detailed implementation procedures, including
time frames, downtime and a plan for rollback in case of failure.
should be defined acceptable levels of service, such as a certain
percentage of permissible downtime every month. Wording can be tricky
here. Most vendors promise 99 percent network uptime. But some maintain
that if the software crashes but the network is still operational,
the vendor has met its obligation even though the application itself
was not available.
on upgrades should be articulated. Software suppliers release an
upgrade every 18 months. If you sign a contract for longer than
that, make sure it includes upgrades.