Despite the fact that other O's are still trying to make sense of ASPs (only half of the top corporate officers surveyed in June by IDC--a sister company of CIO's publisher, CXO Media--said they had ever heard of application service providers), the IT community has accepted them and made them hot. The market's at US$10 billion this year and will soar to $48.5 billion by 2003, according to Deloitte Consulting. To make sense of the myriad vendors, we look to how they're differentiated by some of the most discriminating market watchers--venture capitalists.
Finn Caspersen Jr., founder of Gladstone, N.J.-based Bencas Capital LLC, says his company steers clear of horizontal ASPs, which offer customer relationship management, enterprise resource management and productivity solutions. "We're looking at companies in the vertical space," he says, "because [they don't] compete with larger players and are on their way up."
Fellow VC Mike Shanahan groups ASPs by their longevity and assets. Shanahan, managing partner at Boston-based Egan-Managed Capital II LP, says his organization does not invest in pure-play ASPs because they start from scratch, with no application or existing customers, and need too much money. Shanahan prefers ISPs and software vendors that have shifted from shipping to hosting their applications.
Tom Smith, partner at Mid-Atlantic Venture Funds in Bethlehem, Pa., says that ASPs are so new (and he hasn't seen evidence of universal success or failure in the field) that he takes them enthusiastically on a case by case basis. "The real challenge," says Smith, "will be in figuring out how the ISV [independent software vendor] and ASP models will coexist."
CIOs share similar concerns, and they indicated in a May survey conducted by the Information Technology Association of America that they're not ready to infuse the entire crop of neophytes with post-VC money. The survey of more than 1,500 CIOs and other executives reveals that in one year, only 18.7 percent of respondents said they plan to deploy ASP offerings. They cited integrating ASPs with other applications as a top concern. Get ready for another shakeout.
OPPORTUNITY QUALITY TIME
Congress established the Baldrige National Quality Program in 1987 to recognize U.S. organizations for achievements in quality and business performance and to raise awareness about the importance of quality and performance excellence as a competitive edge. The U.S. Commerce Department's National Institute of Standards and Technology (NIST) manages the program (named in honor of Malcolm Baldrige, secretary of Commerce from 1981 until his death in July 1987) in close cooperation with the private sector. And that's where you may come in.
Each year the program seeks business, education, health-care and quality experts to serve on its 400-member Board of Examiners. Selection to the board is competitive, service on the board is demanding, and it offers no financial compensation. Well, why do it? Being an examiner is a prestigious role that offers opportunities to network with your peers and enhance your professional growth, while developing analytical and consensus-building skills and a systems perspective that can be applied at your organization.
Examiners are selected by NIST and must be U.S. citizens or permanent residents. Applications are available this month and are due in January. For more information, visit www.quality.nist.gov or www.baldrige.org.