Smaller businesses wanting to utilise the power of enterprise
applications can now do so through ASPs. Although the take-up has
initially been slow, Paul Grant believes that the time will soon be
right to move over
Many businesses are still unconvinced by ASPs. Despite potential
cost savings, few are of the opinion that giving up some of their
key systems to third parties is a good idea. However, Microsoft has
just dished out the first of its accreditations as part of its ASP
certification programme, launched in July last year. The two
companies involved, NetStore and Equant, have been certified to run
Microsoft's Exchange package, a communication and collaboration
tool that provides messaging and conferencing platforms, as an
outsourced service.
The announcement comes just after the launch of Exchange 2000,
which shipped earlier this month. All three companies believe that
the combination of accreditation and the move towards the latest
version of Exchange could see a massive increase in interest for
ASPs.Kevin Brigg, Group Product Manager for Exchange at Microsoft
said: "We see a great future for ASPs and want to provide support
for them alongside our traditional licensing model. Our rigorous
certification program will help both the ASP and the confidence of
potential customers. Exchange 2000 has many new features that lend
themselves well to the ASP model, such as active clustering and
load balancing."Add to this Microsoft's .Net vision (of which Chief
Executive Steve Balmer said: "We see software as a service. There
is no plan B") and the company seems well positioned to ride the
ASP wave. Microsoft will certainly hope that it has predicted the
current climate better than it did in the early days of the
Internet explosion, when Bill Gates dismissed the Internet's
importance on the future of technology, and Microsoft somewhat
missed the boat, if only temporarily.The recently accredited
NetStore believes the time is now right for established ASPs to
make the most of the opportunities presented by Microsoft and
Exchange.Sean O'Reilly, VP marketing for NetStore said: "Upgrading
to Exchange 2000 from 5.5 (the previous version of Exchange) or
rival systems like Lotus Notes takes a great deal of time, effort,
and money if done internally. Because of this a lot of companies
are reluctant to make the change. Using an ASP means the upgrade is
quick, painless and is paid for by a simple fixed monthly fee per
user."Upgrade provision is not the only opportunity at which
NetStore is looking. With a heavy small-to-medium focus, the
company wants to be able to provide customers with services that
price and complexity would have previously prevented.Jeff Maynard,
chief technical officer at NetStore, said: "We're able to offer big
boys toys to smaller businesses. Microsoft may say that Exchange is
applicable to businesses of all sizes but the costs and difficulty
of setting up and running an Exchange server prevents smaller
companies from getting their hands on a product which could be of
great benefit to them. NetStore can provide all the functionality
of Exchange to companies as small as three people and let it grow
organically with them."It may be in this type of role that ASPs are
much more likely to find a suitable position. ASPs rolling out
services such as the MS Office suite, which are readily available
and not the toughest to administer, could be struggling to find a
market segment large enough to reap any reasonable profit.
Companies that already have the Office suite installed throughout
the business will find little reason to move over to an ASP model.
Packages that are cumbersome, expensive and a nightmare to
administer on limited IT resources however are prime candidates to
be outsourced to a third party service provider.Unfortunately there
are problems for those who want to get involved in this type of ASP
model - namely, the huge costs of setting it up in the first
place."We would like to see a few more competitors in our market
segment as it would give the ASP market in general more
credibility," explains O'Reilly, "but the barriers to entry are
incredibly high. In order to guarantee service level agreements
(SLAs) with customers we have to control the whole process. If we
take any part of the set-up from a third party and that goes down,
we break our SLAs and that spells trouble. Taking that into
account, it's going to cost any new company about £10 million to
get off the ground. This is without mentioning the vast amount of
expertise that is needed to manage the systems."That said, the
number of companies looking at this market is increasing. Obviously
Equant, which was also accredited by Microsoft as a certified ASP
partner, will also be tackling the Exchange area quite
significantly. Mi8, another dedicated ASP, has also recently
announced its intentions to provide Outlook and Exchange to its
customers.The market may not yet be flooded with true ASPs but the
number of 'virtual ASPs' is increasing rapidly, and these are
coming almost entirely from the reseller community. ASP has been
seen by many resellers as a potential saviour, a way to turn around
those increasingly shrinking margins derived from hardware sales
and to receive a regular income for the service provided.
Unfortunately there aren't many that can afford to set up on their
own but opportunities exist by partnering with the likes of
NetStore, who currently employ many resellers to act as 'virtual
ASPs' responsible for sales, front line support, and creating and
managing customer accounts."Once we've convinced the reseller that
they don't have to throw out their old business model completely
and they get used to the change in cashflow, they soon realise that
a 23 per cent recurring margin is very healthy compared to most of
their other sales," said Maynard. "In time they can even start to
build customised applications of their own on top of what Netstore
provides."Yet all is not rosy in the garden of ASP. There are still
a few issues that need to be dealt with before the market can
skyrocket. One problem is convincing potential customers to drop
the traditional upgrade and sign up with an ASP is the issue of
downtime. A traditional upgrade of this scale in a reasonably sized
company can take up to several months but can be done in parts,
meaning that the application never truly goes down. Switching to an
ASP can take less than a day, but during this time the application
is offline, which may be unacceptable to many possible
purchasers.Connection speed also seems to be an issue, with small
companies likely to be hampered by slow 56K lines until broadband
becomes prevalent. NetStore did not see this as a major issue with
O'Reilly commenting: "Until we start providing multimedia and
streaming the only issue will be costs. With broadband you have a
fixed cost for communication, which you don't have on traditional
telephone lines."Nevertheless at a recent Microsoft Exchange
conference in Nice, where NetStore had provided the communications
network for delegates' use, Exchange was reported by many to be
running slowly. This network was using a connection much faster
than a 56K modem and while it was catering for over 150 users at a
time, it shows that perhaps the issue of speed is not as irrelevant
as NetStore seems to think.With BT finally rolling out ADSL, the
problem of connection speeds may soon be relegated to the
background, which could let small businesses compete on the same
terms as some of the big boys, at least in the case of software
packages. Exchange may only be a small part of the picture, but as
ASP services advance, the offerings will become richer and
businesses could find that having a great deal of their systems
provided by third parties could offer huge benefits.
Paul
Grant