ASP Conference stresses need for customer education

Growth prospects for the ASP (application service provider) market are excellent, but much work needs to be done on educating potential customers, speakers told the opening session of a two-day ASP European Summit in Rome Wednesday.

"There's a lack of awareness and a lack of belief in the opportunities offered by ASPs," Greg Blatnik, vice president of Zona Research Inc., told the conference. "Customer education and awareness needs to be worked through."

Chairing a panel session on "The end-user's process of acceptance and adoption of ASPs," Blatnik cited some of the key factors influencing customer thinking on new outsourcing model. According to market research in the US, he said, reasons for not using an ASP include the customer's belief that his company has sufficient IT resources to run applications in-house, that there is no cost advantage to ASP services, and a desire not to get locked into long-term contracts.

Other reasons were customers' lack of familiarity with the ASP concept, concerns about the security of ASP-provided applications and an unwillingness to trust an ASP with the company's data. "There's a concern about security which is never going to go away," Blatnik said.

Key reasons for using an ASP included the chance to focus on achieving strategic business objectives and the reduction of the total cost of application ownership, he said. ASPs also enabled the quick implementation of new applications, freed IT resources to focus on internal mission critical applications and reduced or eliminated application administration tasks.

Michael Johnson, chief information officer for Enporion Inc., a US company providing a global online marketplace for procurement in the electricity and gas industries, described his company's experience as a satisfied ASP customer. Enporion chose Corio Inc. as its ASP partner on the basis of Corio's proven track record of security, reliability and integration capabilities and its commitment to engaging in a long term partnership based on competitive business terms, Johnson said.

"Our buyers and suppliers are mostly using our hosted software, because it is a quick, low cost, managed service available to them," he told the summit. "We believe a lot of our buyers and suppliers will eventually begin to migrate other back office solutions into ASPs. Hosted services will become the industry norm." Johnson cautioned that companies will only convert from existing systems when the success of the ASP model has been clearly demonstrated, but concluded: "the upside potential in this market is enormous."

Other panelists cited local language issues as an obstacle to the development of ASP services and the worries of some European companies at the prospect of their data being stored in another country. They stressed the importance of service level agreements (SLAs) in connection with reliability and the advantages of agreements that provide for financial compensation in the event of service interruptions.

"A lot of effort so far has been spent on establishing the ASP business but less on promoting it," Hitendra Naik, strategic alliance manager, Europe, for Intel Online Services Inc., said in an interview. "This conference is one of the first major efforts to get information out to the customer. I hope we will see more customers than ASPs attending the event."

Worries over security, reliability of service and inadequate telecom infrastructures were all obstacles to the development of the new market, Naik said. "Telecom infrastructures may need to improve," he said. "Leased lines with guaranteed bandwidth are very expensive in Europe. There's not the number of different carriers and sufficient competition to make the service cost effective." This was particularly damaging for small and medium-size companies, which stood to benefit most from the outsourcing of services to ASPs, Naik said.

Naik believes the ASP market is coming to the end of its embryonic, startup phase. "A lot of the hype about the ASP marketplace is dying down and real applications are coming through," Naik said. Intel now has seven data centers worldwide and has just announced the opening of a new one in China, the first to be installed there by a western multinational. "All the pieces are coming together, but education of the market, of IT managers and end users, still needs to take place," he said.

Dwight Krossa, director of ISP/ASP marketing and Windows server marketing, at Microsoft Corp., outlined his company's plans for boosting the ASP sector. The software company was developing products that will take care of authentication, security and service integration for ASP clients, Krossa told the conference.

"We can't emphasize enough this concept of integration. The ASP world is about offering customers what they need, not forcing software on them," he said. "Integration should not cost months of time and millions of dollars spent on consultants. Integration should be a very easy and automatic service." For this reason Microsoft is developing new products using open, industry-accepted protocols and, in particular, XML (Extensible Markup Language), he said.

The advantages of Web-based services are fast development, fast change and scalability, permitting clients to develop their computing capacity in line with the growth of their client base, the Microsoft director said. Microsoft is working to ensure that applications will function on a wide variety of terminal devices, from PDAs (personal digital assistants) to mobile phones, he said.

The company intends to use its global network of partners to boost the development of the ASP market, Krossa told the conference.

"The first ASPs built great Websites, but no one came. Sales channels are critically important and Microsoft has more than 30,000 partners who are able to sell anywhere in the world," he said. "Microsoft is committed to the ASP market. We offer a great set of technologies and one of the strongest sets of partners in the world. Sales channels will be the key to success in the ASP market."

Not all attendees were impressed by the Microsoft account of "The next generation ASP."

"Microsoft haven't come up with anything revolutionary for the Web environment," said one attendee, who asked not to be named. "They are repackaging their existing products. ASP is just a new distribution network for them. That's disappointing."

Microsoft cash and marketing muscle could contribute significantly to the development of the ASP model, the attendee said. "How much they do to promote their partners remains to be seen. The industry has a love-hate relationship with them. You may hate them, but you can't live without them," he said. "Just repackaging Microsoft products was not what ASP was originally about. It should be offering small companies the opportunity to challenge the behemoths of the software industry."

More information on the ASP European summit is available in Rome at +3906 3509 3025 or on the Web at Microsoft, in Redmond, Washington, can be reached at +1-425-882-8080 or at Enporion Inc. can be reached at +1-866-436-7674 or on the web at

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