With more than £500 million of investment and the combined sales forces of Cable & Wireless and Compaq behind it, C&W a-Services is going to become a major ASP. But is this good news for the customer?
C&W a-Services' constituent parts include hardware and support from Compaq, applications from Microsoft, with C&W providing fibre for delivery of service.
Aimed squarely at the small to medium enterprise (SME), C&W a-Services plans to deliver Office applications, email and Internet access under a managed firewall and anti-virus screen. The default PC for the desktop is the low maintenance Compaq iPAQ, with application and datafiles held on whichever is the closest of the 20+ data centres providing a virtual network for customers in over 80 countries. The headline figure for the US rollout is $189 per seat, with a rumoured equivalent of £150 a seat for the UK launch later this month.
Jonathan Thompson, president and CEO of C&W a-Services, outlined the strategy of the new venture. "The initial offering is based on collaborative computing. Subsequent announcements will explain how we will supplement this with front and back office. I can see why some would say that this is best for a big 'greenfield' site. However, we don't think it's exclusively suited to these businesses."
C&W a-Services' first customers have primarily been dotcoms looking for deployment and fixed cost. However, even though they are offering a monthly billing plan, customers are still locked into a minimum contract of 24 months.
"I don't think I like using the term lock-in, but I do take your point," Thompson continues. "But if you're running a small to medium business, you have a natural desire to only keep hold of what's dear [to the core business]. Whether our model is right or there's another model or a better method, there is an inextricable move towards companies focusing on their core business. Among the key motivators for this are the 850,000 vacancies in the IT industry. The companies having difficulty hiring these people are SMEs.
"That is why we believe that the small and medium businesses will be the first attracted, as it allows them to get on the e-business fast track, giving them access to larger business type applications where they can integrate buyers and suppliers. Cynicism apart, it's going to happen; it's a question of when. We think the time is right, but it is now a question of building the trust. This model is here and here for good absolutely."
Despite the imposing pedigree of the newcomer, many rivals are outwardly unworried by C&W a-Services. John Lillywhite, director of marketing communication at FutureLink, is positive about the new kid. "This shows the validity of the model which we have been working in since 1995, when ASP was just server-based computing," he says. "We're big enough now with enough solid, growing customers to be unaffected by entrants such as C&W a-Services. However, like C&W a-Services, the ASP market needs to become infrastructure providers because there is a storm coming which will remove a lot of the smaller ASPs who lack data centres and the support experience to service this growing market.
"We don't quite understand how C&W a-Services can claim to be the first to market with an end-to-end solution," he adds. "FutureLink, Coreo and others have offered these solutions previously, the only differentiator being that they 'own' the fibre, but we question whether this is actually an advantage to the customer or more beneficial to C&W a-Services."
Sceptics may argue that the real winners of the C&W solution are the constituent parts, C&W are getting to sell their fat data pipes into SME businesses that would normally have just taken a smaller ISDN option. Compaq and its underfeed channel can grab a large chunk of the valuable SME market, with the $500 iPAQ potentially becoming a $2000 item based on a 24 month contract. And lastly, Microsoft is guaranteed a piracy-free, monthly revenue model with customers effectively coerced into upgrading when the ASP upgrades.
Whether adoption of the C&W a-Services model actually reduces the total cost of IT ownership for many small businesses is debatable, especially for the less complex applications such as word processing, email and Internet access, which presently are the only offerings from C&W.
On paper, the offering is very attractive to the start-up. But as industry analyst, Neal Faucet points out, "...the total cost of ownership issue is far more complex depending on the size and type of business. In the long run, ownership of these very basic services is still a high price for the small business. Where C&W a-Services is moving is in providing a basic platform for applications - the horizontal bedrock if you will - upon which other services and solutions to be added.
"If you project forward then you could potentially see a few super-ASPs remaining, perhaps large telco players, who act as the infrastructure upon which ASPs exist," he goes on to add. "C&W a-Services is laying its stall out here, defining its role in the future of web-based software deployment and basically making itself look as attractive as possible for other third parties.
"Because other ASPs understand the basic level that C&W a-Services' customers are running, it makes deploying previously untouchable applications, such as ERP, SAP etc., viable for the SME that has traditionally avoided them. "
Analysts are enthusiastic about the potential revenue that the ASP model represents, but customers that have moved more than just email and contact books to the ASP model are few on the ground. As one enthusiastic vendor at the last ASP event effused, "...our customers are demanding CRM via ASP, and we are delivering because this is the most cost effective and scalable solution on the market."
If you ask the same vendor whether they have deployed an ASP solution internally, the answer is unfortunately, "Er, no. Not yet, but we are planning to...soon."
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