Death by ASP

Suppose you were heading a joint venture of two of the biggest, wealthiest technology companies on the planet and you wanted to tell your customers that you were shutting your doors. How would you do it?

Spam 'em, of course!

On July 28, customers of Pandesic LLC, an application service provider (ASP) owned by chip giant Intel Corp. and German software powerhouse SAP AG, received a Dear John e-mail: "We are winding down our business because we don't see a timely road to profitability due to slower than anticipated market acceptance of business-to-consumer electronic-commerce solutions.... Your account manager will be contacting you shortly to begin working on your particular circumstances."

More than a month later, those particular circumstances had yet to be revealed, beyond Pandesic's promise that it would support customers until Jan. 31, 2001, when the lights would go out forever in its Sunnyvale, Calif., headquarters. Most of Pandesic's 100 customers are electronic-commerce startups that depend on the company's software (based on SAP's R/3 enterprise resource planning software) to handle sales and fulfillment for their Web storefronts. For the service, they pay a monthly fee and a 2 percent cut of their revenues to Pandesic.

The CEO of one of those startups, Ed Vincent of New York City-based, which sells hard-to-find local products from big cities like New York and Boston, banded together about 40 of Pandesic's customers in an ad hoc "knowledge community." The group meets each Tuesday via a conference call to offer Pandesic deathwatch updates, share leads for replacement vendors and present a unified voice to the company.

Some of the troubled ASP's customers are big enough to easily find their own voice, however, including Osh Kosh, Wis.-based children's clothing maker OshKosh B'Gosh. Jon Dell'Antonio, the company's vice president of management information systems, had Pandesic's COO Ed Harley on the phone the afternoon of July 28 and wanted some answers. "I could tell from the conversation that he didn't know the plug was being pulled," says Dell'Antonio, but he adds, "They want to do the right thing-as long as they're able." Indeed, even if he finds a replacement right away, Dell'Antonio worries that it will take him months to switch OshKosh's back-end fulfillment operations over to a new provider. Will Pandesic hang on long enough to provide support until January? "They're in the middle of Silicon Valley. How long can they hold on to their support people?" he asks.

This wasn't supposed to happen. With Intel and SAP as its powerful string pullers, the one ASP that seemed a good bet in the fledgling industry has became one of the first to go. "We thought that with those names behind it, there would always be the appropriate financial backing, which of course proved not to be the case," Vincent says with an ironic chuckle.

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