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Q&A: Jamcracker CEO Todd Johnson

The dot-com bust was unkind to ASPs . What seemed like a good idea for businesses in the mid-90s -- outsourcing the software at a hosted location -- turned into a nightmare as flash-in-the-pan providers suddenly couldn't keep up with the bills. In many cases, the customer was stranded with their critical data stored in a database in another part of the country, held hostage by bankruptcy courts.

So when businesses started putting their information back behind the firewall, the remaining ASPs found they lost much of their customer base to enterprise resource planning (ERP), customer relationship management (CRM) and supply chain management (SCM) software vendors like SAP , PeopleSoft and IBM .

One of those companies was Jamcracker, an ASP aggregator created in typical dot-com fashion with $142 million in venture capital financing. Once the customers started leaving, CEO Todd Johnson had adapt or be overcome. Thus began the transformation from Jamcracker the aggregator to Jamcracker the enterprise software developer, resulting in its software suite Pivot Path.

Johnson recently spoke with internetnews.com about the process and where he sees the company going.

Some industry watchers have declared the ASP industry dead. Is it?

No, the ASP industry has gone through significant shakeout and consolidation, but it's really just gaining momentum. I think as more enterprises move to a service oriented architecture (SOA), they will find it easier to source applications from ASP's and then we will see the next level of growth in the ASP industry. Technology, the economy and IT's resistance to forfeiting control, all contributed to the false start for the ASP industry. But, this last economic cycle has IT looking for ways to focus on the core, and outsourcing to ASP's is looking increasingly attractive.

The technology issues are getting easier to manage as well. The growth of identity management as a core component of SOA is just one of the many technologies that will serve as an enabler for the ASP industry. We were certainly too early to the market, but the market will succeed.

Did it require a fundamental change in philosophy to move your company from an ASP aggregator to software provider?

It was a big decision. We had to plan a process by which you morphed from one to the other, but still kept in mind that the end point, being a software company, had a very different profile than the managed service company. The change effects the type of people in the company, the skills set required, the things you measure, etc. By definition, if you get to the new end point and have not changed a lot of the company's people and overall makeup, you either started with the wrong people or you ended with the wrong people.

Was there resistance within the company over the software direction?

Some. Change is rarely ever met without uncertainty. People also knew that the change might affect their role -- or -- worse yet, their employment with the company. The fact that people knew some jobs would be lost really created concern. But, we had to manage through that. We were as open and honest as we could be about the decision process and the effect it would have on everyone. Those that were close to the decision were unanimously for it. As hard as the change would be, it was what was best for the company.

What about Jamcracker made it agreeable to such a big change?

I think everyone wanted to do what made the most sense. We had already been through a lot as a company. I think people also knew that all over the Valley companies were going through similar tough decisions. Maybe the biggest reason we made it through is that we had a core set of employees that fundamentally believed we had built something of value and they were committed to do whatever was required to unlock that value.

At what point did you decide the time was right to switch to software?

At the end of 2002 we had spoken to 70+ prospects and the feedback was consistent, "What you have built is very interesting. I can see how it applies to our business, but we need the solution behind our firewall, not as a managed service". That was the turning point. We could see clearly that the operations platform we had developed for our managed service was a great solution if we could deliver it as a stand-alone software product. So, off we went to get that done.

Do you think other ASPs are positioned to make the same move Jamcracker did?

I think some other managed service providers and ASP's will make this move. In the end, success comes from flexibility. Eventually ASP will be viewed more as a delivery option than as a business model. Not to say that some companies won't stick to an ASP only model, I just think they will be the minority.

Were you an early proponent for the change within the company to a software provider, and do you think it helped you rise through the ranks at Jamcracker?

I not sure I would call myself an early proponent, but I did send a note to the key members of the management team in February of 2001 predicting that by sometime in 2002-2003 we would need to be able to deliver the "Jamcracker Platform" (now known as Pivot Path) in a form that could be deployed behind a customer's firewall and that it likely would need to be based on open source components to make the required cost targets.

Well, I guess that was early, and I guess I was right. We came to this decision as a team. We had to take into account strategic direction, business opportunity and the technical hurdles required to ultimately deliver the product. It had to be unanimous!