The Tangled Web of Service Management

Selling service-management software to ASPs is tricky business. ASPs can benefit from billing, provisioning, metering and SLA monitoring solutions. The problem? “Many ASPs are struggling,”Summit Strategies analyst Amy Levy told ASPnews. “It’s two messy industries colliding.”

Levy is the author of ASP Service Management: What a Tangled Web We Weave, a 70-page report released by Summit Strategies today.

The product offerings in the service-management category are numerous and complex. Stir in the fact that you have emerging companies trying to sell to ASPs and other service providers (xSPs) that aren’t exactly swimming in black ink these days and you have the formula for confusion and hesitation. Levy puts it more bluntly: “Right now, the landscape is a bloody field.”

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The good news, according to the Summit report, is that ASPs need to automate repeatable processes to manage software as a service (SaaS) in a scaleable and profitable manner. The bad news is that it won’t happen overnight. “It will be a while before xSPs can open their arms to service management,” Levy told ASPnews.

Everybody Needs Service Management Sometimes

While the road may be a little bumpy for companies that offer service management solutions, one of the bright aspects is that every company involved with SaaS is a potential customer.

“All service providers will need some aspect of service management,” Levy told ASPnews. The range of customers include traditional ASPs like Corio and USi, Net native service providers such as Employease and Upshot and enterprises that are serving software to an internal customer base.

“Not every service provider will need all the pieces. Net native software providers won’t not need provisioning, but will need billing and SLA management,” Levy said.

The biggest reason why ASPs and xSPs will turn to service-management solutions is because they simply will have to in order to make money. The Summit Strategies report points to a recent Ernst & Young study that found that 70 percent of xSP’s revenues go towards operational expenses. To drive down those costs, ASPs will need to adopt service-management solutions that automate sales, delivery and service. “Until then, service providers can’t hope for profits,” Levy said.

Many Will Try, Half Will Survive

Summit’s report profiles 31 service management providers. How many of those will be around two years from now? “Maybe 15 or 20,” Levy told ASPnews.

Like the ASP and xSP industry that makes up its customer base, the service-management sector is overcrowded in some categories. “For example, there are a lot of billing players. I see a shakeout in that space,” she said.

The Future Is Bright (for Some)

The service-management industry faces challenges on many levels, but there is hope and potential prosperity for companies that cut through the clutter and confusion. The Summit Strategies study lists four steps service-management providers can take to survive a shakeout:

  • Sharpen their value proposition — attach real-world benefits to product descriptions and articulate return on investment in terms of both time and money savings.
  • Architect integration-friendly solutions — vendors that create next-generation toolsets based on Web standards such as XML and Java will have a competitive advantage.
  • Align with heavyweight — vendors such as Microsoft, Oracle, Sun and IBM have a vested interest in creating their own version of Web-services ecosystems. Service management vendors should take advantage of the technical guidance and resources, go-to-market support and opportunities that these partnerships can provide.
  • Forge partnerships with large systems integrators and suite providers — system integrators and IT vendors will play an important role in the development of service-management solution stacks. Standalone service-management vendors should look for opportunities for inclusion in these stacks, which provide greater market awareness and wider sales channels.

Service management vendors may also need to develop some strategies that take into account the current state of the ASP market. “They will need to look at creative pricing. xSPs are growing businesses and it may take some type of pay-as-you-go model, something that doesn’t involve a huge risk,” Levy told ASPnews.

“xSPs have so many issues. Many are struggling to stay afloat, but the savvy ones, the ones that are ahead of the curve, see the benefit of service-management software.”

Do you have a comment or question about this article or the ASP industry in general? Speak out in the ASP Discussion Forum.

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