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Some ASPs Survive, Others Thrive

There are two distinct ASP industries at the moment. One merely survives; the other thrives.

On the surviving side are those ASPs whose main business is taking recognized software packages and making them available online as a hosted alternative to the original packaged product. This is a difficult thing to do as a viable business proposition, especially if the software isn't purpose-built for online delivery. That's why many have failed. Those who still survive should have learnt enough lessons by now to operate a profitable business, but it will never be an easy task.

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Companies on the thriving side of the industry deliver applications and services that were born on the web and have never had any existence outside of that environment. In the past, the breadth and quality of what they had to offer hasn't seemed to measure up to the more rigorous standards of enterprise-class software applications. But these Web-native ASPs are just now htting their stride, and they're beginning to pick up a significant numbers of enterprise customers.

The greatest progress is being made with applications that exist only on the web. These ASPs are not attempting to supplant traditional enterprise software packages with direct replacements — that would not only be futile, it may ultimately become irrelevant as new business requirements take shape in the online era.

Instead, enterprises are discovering a need for Web-native applications and services that have no equivalent in the offline world; or alternatively, that Web-native providers can offer them functionality they've always wanted, but which has never been readily available to them offline.

One of the most striking effects of this transition is that some unexpected names are joining the ASP industry from the dot-com world. Two news stories last week demonstrated just how broad the Web-native segment of the industry is becoming.

Expedia Takes ASP Route
Who ever would have predicted that Expedia would one day become an ASP? Last week, the online travel booking service — whose parent Microsoft is selling its controlling interest to USA Networks in a deal announced earlier this month — launched a new private-label booking service for travel industry clients. (See Taking Travel the Private Label Route, July 25th, 2001.)

What Expedia is doing is wrapping up part of its infrastructure and operations as a saleable, online business service. Its first client is American Airlines, which will use the service to add hotel and car rental booking to complement the air travel booking already available on the AA.com Web site. Many observers once saw AA.com as competition for Expedia. Instead, AA.com has now become a customer for Expedia's proven infrastructure, delivered as a Web service in what is effectively a master provider model.

Screaming for Web Services
The acquisition of Stockpoint by ScreamingMedia last week highlights another example of former dot-coms migrating to become enterprise Web service providers. (See ScreamingMedia Buys Stockpoint for $21 Million, July 23rd, 2001.)

Stockpoint started out as a provider of realtime stock market information to dot-com portals. But today, its customer base is skewed towards financial industry enterprises who take its information feeds for analysis by their own staff rather as much as for onward publication. ScreamingMedia, which aggregates and filters news and information feeds (including Stockpoint), was also founded as a service provider to Web portals. But it too has found enterprises forming a growing portion of its client base. The acquisition is designed to accelerate this transition.

These new entrants to the ASP landscape may not look much like ASPs just yet; but under the surface, there are many similarities. Those similarities will grow as Web service providers add infrastructure technologies and services for billing and service-level monitoring that have often been pioneered by existing enterprise ASPs. Nor will it be long before partnerships begin to blossom between these providers and other ASPs where they find themselves serving the same enterprise clients.

Skill and infrastructure that can link together multiple Web services will become important assets as such relationships develop. As well as the broader frameworks under development by industry giants such as Microsoft, IBM and Sun, more pragmatic solutions are emerging today from a handful of startups that our executive newsletter ASP News Review is watching closely. Among them, CrossWeave is the subject of a profile in this month's issue (July), while next month there will be a profile of Genient.

This review of the week's news highlights is by ASPnews.com founder and consulting analyst Phil Wainewright. A comprehensive news digest is published every month in the ASP News Review newsletter, available exclusively to subscribers.