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Virtual ASPs Get Real

Getting resellers motivated to sell hosted software services has been a challenge since the inception of the ASP industry. That's because most resellers would rather receive a hefty chunk of cash for selling expensive software licenses and the necessary hardware to implement a complete system than get a smaller and uncertain stream of revenue for introducing customers to the concept of software as a service.

One solution to this problem, and one that is gaining popularity, is for ASPs to turn potential resellers into virtual ASPs (VASPs). A VASP has its own customers, which it bills for software services that actually are provided by a third party — a real ASP. The VASP usually pays a fixed recurring fee for the services it sells to its customers, and is free to mark up these prices or combine them with other products or services to create its own packages.

Who Should Be a VASP?
The most effective area for a VASP to operate in is a highly focused vertical market where the VASP has particular market knowledge or industry-specific skills that it can offer potential customers — technical ASP expertise is not necessary because the application delivery side is carried out by the real ASP.

Pleasanton, Calif.-based accountancy and e-business software company ACCPAC Online's Preferred Accountant Subscription Services (PASS) program is a perfect example of a company creating a VASP channel to resell its products.

The program involves the company, a subsidiary of Islandia, New York-based Computer Associates, signing up accounting firms to become VASPs that will offer ACCPAC's Advantage Series software to their customers. The software will be branded with the VASP's logo, and may be integrated into other services they offer their clients. While the accountancy firms will provide customers with accounting, software training and consultancy help, ACCPAC handles connectivity, application delivery and billing, and organizes data migration.

"A key selection criterion for choosing an ASP is that it understands the industry it is selling software services into, so it makes absolute sense for an accountancy firm to be an accounting ASP," Bill Copeland, ACCPAC vice president of marketing, told ASPnews.

Reasons to Be a VASP
Accountancy firms also have three strong reasons for wanting to becoming VASPs, Copeland said. "Firstly, it helps them retain clients as it enhances their trusted advisor role. Secondly, the ability to offer accountancy software gives them a competitive advantage, which should help them win more customers. And finally it can help them increase their revenues by having this, and other services they can bolt on to the software, to sell."

For example, by offering their "own" software on an ASP basis to customers, accountancy firms will have the opportunity to monitor their clients' financial health and to access secure, real-time views of their clients' financial accounts and data — if customers allow it, Copeland said. This will enable program members to offer new services to their customers, which would not be possible if these customers hosted and ran their own accounting systems.

The PASS program is aimed at accountancy firms whose customers have annual revenues of between $5 million and $200 million. Many of these customers are using legacy accountancy systems that are nearing the end of their life cycles, and will be looking to upgrade to more capable financial systems without incurring substantial new IT costs, Copeland said.

How It Works
The ACCPAC system is made up of 12 modules, and its VASPs will be offered these services at a 20 percent discount off the published price list. They can therefore resell the services to customers with a 20 percent margin or create their own packages and pricing structures.

The entire service is delivered using the iCan Provider Suite supplied by iCan Inc., another CA subsidiary. The iCan platform includes a billing system that will provide billing to the VASPs to pass on to their own customers, and a self-provisioning capability to enable VASPs or their customers to switch modules or users on or off themselves. The system works on a one-to-many basis, using one set of applications and separate domains and databases for each accountancy customer.

ACCPAC already offers the Advantage series on an ASP basis both directly in North America, and through U.K.-based ASP iRevolution in Europe. It plans to roll out the PASS program in Europe, South Africa and Australia over the coming months, from a Telus Communications data center in Vancouver Canada, and from iRevolution's data center in the U.K

ACCPAC is attempting to establish a network of motivated resellers with the specialist knowledge and customer base necessary to make a significant number of ASP "sales" by turning them into VASPs. Other ISVs will be watching this and other VASP experiments closely, and if it proves successful, expect to see many more VASP programs in the future.