Plan Carefully During ASP Transition

Most ISPs moving into the ASP space will not do so alone. Companies need partners, and partnerships require extra work and clear communication.

by David Braue of ispwatch.com.au [August 30, 2000]

ISPs and other companies considering a move into the application service provider (ASP) industry need to look past simply renting applications, carefully formulating underlying business propositions and strategic partnerships, or certain failure will await, representatives of various ASP-related industry segments warned attendees of last week's ASP Summit in Melbourne.

Decrying what he called "the result of bad strategic planning and business plans," Ross Mackie, marketing director with Computer Associates' ERP-focused interBiz subsidiary, said most pure-play ASPs had failed miserably so far because they'd focused too much on the technology without considering the real needs of their target markets — or, in many cases, even figuring out what their target markets were.

Get small
In many cases, ASPs vaguely refer to potential customers among Australia's largest companies, he said, but "the opportunity as we see it for ASPs is to focus on SMEs. The issues SMEs are facing often revolve around e-business, and large corporates in Australia forcing smaller businesses to comply with their e-business trading regimes. But every CIO, IS manager and other executive will be fighting against an ASP solution. In the SME sector of the market — where they do not have an IT function — you have an advantage because they urgently need to get an e-business function."

More than 400 attendees congregated on Melbourne's Hotel Sofitel for the ASP Summit, the second time this year the relatively new conference has been held in Australia.

Make friends
And while enthusiasm for the ASP model was high all around, Mackie was not the only one cautioning current and potential ASP market players to take it carefully. Partnerships — crucial in an environment where it's quite difficult for any one company to deliver applications, managed infrastructure and integration expertise through the same organisation — were a common theme throughout the sessions, with Cable & Wireless Optus application services channel manager Brett Stevens highlighting the telco's efforts over the last year to position itself as a preferred infrastructure provider for ASPs.

"We made a lot of mistakes" in a year of trialing ASP solutions, Stevens said. "One of the critical success factors is that you can't set out to do this alone; there is no way Optus or anyone else can do this alone. [But partnering with Optus provides] access to a customer base of several hundred thousand SMBs. We can link ASP solutions into channels to provide bundles of total services with end-to-end services. We can bring customers in and sit side by side with ASPs, put our arm around them, and give them credibility and customers confidence that there is a big brother behind them."

But forming such partnerships can be tricky. Issues such as sticking to service level agreements (SLAs), customer ownership, and maintenance of strategic partnerships highlight the need for companies to approach ASP partnerships carefully, as two representatives of IT law firm Gilbert & Tobin warned in their jointly presented conference session.

Partners "have to have discussions about agendas," said IT lawyer Peter Leonard. "Generally, people don't come together for the same reasons, and it's important to recognise that. In any strategic alliance, there are always conflicting agendas, and we always want to move the discussions to the next stage — about what conflicting factors and agendas need to be taken into account."

Get it done
"Think about upstream arrangements," he continued, "and what you can tie down, before you can look at designing the contract with the customer. It's a case of keeping it simple, identifying issues early on and addressing them before you get into negotiations. If you do that, no deal is too complicated to negotiate in six to eight weeks."

Related section
Internet.com has an ASP Resources section.

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