Holes in the heart of ASP

Ian Hugo asks, is the ASP bubble about to burst?

Ian Hugo asks, is the ASP bubble about to burst?

Having ASPs provide applications as and when needed to your desktop sounds like a great idea. No more struggling to keep up with the latest releases, no more problems with service or paying for applications you don't use. But... well, there are a lot of buts.

Ask yourself what the attraction behind the hype really is: cost, service, support or what? As far as I can see, better support is the only real benefit on offer and even that could be doubtful.

Let's look at cost. With an ASP (Application Service Provider) you rent the use of an application rather than buy it outright. For users to sign up, the cost is going to have to look cheaper on paper - but will it be? The likes of Microsoft and Oracle are all busily setting themselves up for rental revenues and when did you last hear of them switching to less profitable revenue streams?

Moreover, since the principal target market is SMEs, sales will be through distribution channels, which means the revenue being split several ways. But an ASP deal means you can't just sell and then forget the customer. And what does the user do with their existing purchase licences? Just write them off? Sure, ASPs will keep you up to date with new releases, but how many SMEs really need them and the cost of them?

So let's look at service. Where are the problems now? Is software difficult to install? Not usually. Most difficulties arise from setting up data and procedures and in inadequate training. Does an ASP deal help there? Not unless the ASP or its agent picks up a consultancy deal to help with setup and training. And what does that do to cost, other than make true costs explicit?

The other general fault with service is failure to sustain the application as needed. A good ASP may do that better than a poor internal IT function but the ASP faces an additional risk through the network connection. A reasonable internal IT function ought to be able to do at least as well.

And what happens if you're unhappy with the application when you get it? Much was made a few years ago of the St Albans vs ICL court case where the court's opinion was that software could in certain circumstances be regarded as goods and thus subject to the provisions of the Sale Of Goods Act. So you might have recourse in law for an application that was not of 'satisfactory quality' under the terms of the Act.

That, though, can't apply to software downloaded electronically.

Which leaves us with support. Support is undoubtedly both the main attraction for users and the critical success factor for ASPs. The notion of 'no worries', particularly for IT, will always be attractive to business users. However, the same could be said of outsourcing and some very painful lessons have been learned in that field. Moreover, the notion of the USP (Universal Service Provider) is now around: a one-stop shop for all your applications - in other words, an ASP that can provide excellent support for all applications anyone in its market needs. I doubt it.

I think ASPs will be a useful alternative channel for the provision of some applications. But as the answer to every business manager's prayer it is probably overdue for the same treatment as other brave new worlds have recently been receiving.

Read more on IT outsourcing

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