Few would argue that the rise to prominence of the application
service provider (ASP) and the future of the ASP market was the hot
topic in the software industry this year.
The sector was not short of long-running sagas either, with the
still ongoing court battle between Microsoft and the US Department
of Justice over the break-up of Bill Gates’ company, and the
drawn-out acquisition of ailing Dutch software company Baan by
Invensys among the most indicative of these.
On the proliferation of ASPs, at the beginning of the year, a
wide variety of firms ranging from industry giants such as Oracle,
down to small ISVs and VARs were looking to move into the market,
despite the fact that the ASP market had yet to take off.
This was perhaps triggered by estimates by the likes of analyst
Ovum, which predicted that the ASP market worldwide would grow at
an astonishing rate, from $1bn (£625m) in 1999 to $44bn in
2004.
As we approach the end of the year, with the ASP Industry
Consortium now established, and the newly created ASP Forum set up
by a select few industry players to cut through the hype and
resolve customer confusion, analysts are still predicting growth,
albeit at a slower rate than was first mooted at the outset of
2000.
Indeed, the consolidation we are seeing in the market now, with
the ASP bandwagon jumpers falling by the wayside, was forecast at
the outset by Rob Hailstone, who was then research director at
Bloor Research. Back in January, Hailstone commented: “We will see
things start to shake out,” adding “despite its immaturity, the
market is fragmenting already”.
These comments have been borne out by the latest study into the
European ASP market by Frost & Sullivan, which predicts that
despite the growth expected in the sector, market consolidation is
expected to squeeze many smaller players out by 2003.
The Microsoft saga
Returning to Microsoft and the seemingly endless battle between
the software giant and the US DoJ over the decision to break the
company in two after it was found in breach of anti-trust laws. We
did not have to wait long into 2000 to see major developments
taking place at the vendor, with supremo Gates opting to step down
from his position as CEO after 25 years at the helm, to be replaced
by Steve Ballmer.
Although Ballmer insisted at the time that Gates’ decision was
not made in reaction to the bad press he received during the
anti-trust case, many industry observers believed the opposite was
true.
And in April the ruling was delivered by Judge Thomas Penfold
Jackson that most were expecting — that the company must be split
in two.
Since then, of course, Microsoft has appealed against the
decision and the case is set to drag on unresolved well into
2001.
When the ruling was made, most analysts were of the opinion that
Microsoft would continue as normal and would perhaps even prosper
further from the move.
But one analyst was rather more scathing about the way in which
Microsoft had handled the whole issue.
Clive Longbottom, then of CSL, now at Quocirca, said of Gates:
“Billy-boy could’ve avoided this if he wasn’t so arrogant as to
think he could disregard the US judicial system.
“If he had broken up the company himself six months ago, he
could have put a positive spin on it and increased the share value,
rather than have it forced upon him and see the shares plummet,” he
added.
If all this wasn’t bad enough for Microsoft, it also had to
contend with an investigation by the European Commission into its
Windows 2000 software system. But enough about Microsoft’s
woes.
Highs and lows
Another long-suffering outfit, the once prosperous Dutch
software company Baan, was at last put out of its misery when it
was acquired in the summer by Invensys. The takeover followed a
wretched period that saw the company post consecutive heavy
quarterly losses stretching back nearly three years.
Belgian voice recognition software producer Lernout &
Hauspie has also had a dramatic turnaround in fortunes. In the
spring, it became the largest producer of speech recognition
software in the world as a consequence of its acquisition of Dragon
Systems for £376.5m.
But the intervening months have been little short of disastrous
for L&H, with a number of high-profile resignations from the
company’s board, including those of co-chairman and managing
director Pol Hauspie and former CEO and president Gaston
Bastiaens.
In addition to the departures, the company filed for Chapter 11
bankruptcy protection in the US; suspended the CEO of its Korean
unit, Joo Chul Seo, after he misappropriated £21m of a Belgian
venture capital company’s money, using it as collateral for a
private loan; and the US Securities and Exchange Commission
investigated the company’s past financial statements.
The combined effect of the various setbacks saw L&H’s stock
suspended from Nasdaq and Easdaq, having fallen 90 per cent in
value since its March high.
As we now approach the close of the year and anticipate what is
in store for 2001, it is fairly safe to assume that software
services, ASPs, managed service providers (MSPs) and the like will
continue to be the main growth areas, with major companies such as
HP completely shifting their focus to capitalise on the changing
marketplace. Perhaps 2001 will clear up the confusion surrounding
the mechanics of the hosting market.