Analysis: Is Sun Burning ASP Bridges?

At one time, enterprise ASPs thought their toughest competition would come from giant telecoms companies or from the “big five” systems integrators.

Now it’s clear that where such companies attempt to compete in delivering hosted third-party applications, they will be no more than a minor irritant to established enterprise ASPs. Indeed, a recent report from the Dataquest arm of analyst group Gartner has warned off telcos from attempting to set up ASP operations. They should stick to hosting ASPs — which they do very well — but refrain from getting involved from applications management, which they don’t understand at all, said the report.

As for the likes of Accenture, Deloitte Touche and KPMG, they are turning out to be valuable allies rather than hot competition for ASPs. They have no interest in running data centers or tuning system architectures. In fact, it seems that calling them systems integrators has always been a bit of a misnomer. What they really like doing is setting up the automated business processes that run on top of the software systems. Leaving the technology layer to ASPs suits them well.

So ASPs are striking up close bonds with integrators and telecoms companies, who have become allies providing complementary services. With ASPs edging ever further into the large enterprise market, partnership has become even more attractive for the integrators and telcos, since the size of deals ASPs can help deliver has swollen significantly.

All of that is bringing their primary competition sharply into focus. Top-tier enterprise ASPs — led by ASPnews Top 20 companies such as USinternetworking, Qwest Cyber.Solutions, BlueStar Solutions and Corio — all now see clearly that the main threat to their survival is coming from the likes of EDS, CSC and IBM Global Services.

So it must have come as something of a shock last week to see Sun Microsystems — which has made a great play of presenting itself as a friend and ally to the service provider sector — signing a deal with EDS to jointly market an expected $3 billion worth of Web hosting, outsourcing and ASP solutions to Global 500 customers over the next three years (see Sun, EDS Offer Combined Solution).

With a single stroke, Sun risks wiping out all the goodwill built up by its investments in the SunTone certification program, by its ownership of the iPlanet family, by the development of Java and J2EE, and by its dominance as the server platform of choice for Internet computing. When ASPs go head-to-head with EDS for ASP contracts, who will Sun be rooting for?

This would be a smart move if Sun had picked the winning side. But EDS has no track record of success with the ASP model. ASPs have the know-how to become the ultimate winners of that head-to-head battle. Sun would do well to keep them on its side.