December 27, 2000, 9:31 AM — Application server and tools vendor Progress Software has got the ASP bug. Whereas many software vendors are uneasy about selling their applications on a subscription basis, Progress sees it as an extension to its independent software developer network. Progress CEO Joe Alsop recently spoke with InfoWorld Executive News Editor Martin LaMonica about how application vendors will make the switch to application hosting.
InfoWorld: Progress is built around an indirect sales model. Why is that an advantage in the ASP market?
Alsop: Because we think that the success in the ASP market is going to take a combination of things. The technology has to work, and you need some services and partnerships to go with it, but the indirect model that we've grown the company into, something around a third of a billion [dollars annually], is very much built on partnerships with our ISVs, our independent software vendors. And in essence, we build the business around a recurring revenue model, rather than big quarter-end deals, and that's one of the big advantages that we have. The combination of partnerships and the willingness to accept some of the referral of revenue on a subscription basis, spent out over time associated with the ASP model, gives us a big leg up in the marketplace. Essentially, Progress doesn't need the big quarter-end deals to make its numbers. And that puts us in a real advantageous position when approaching something that we think is a long-term win like the ASP model.
InfoWorld: How many of your ISVs have actually become ASPs?
Alsop: There are over 150 that have signed up for the apps and [Progress ASP enablement] program. Now that's the ASP-enablement program, meaning they're getting into the program and there are about 50 that are in market with 70-plus applications, which we believe is the largest number in the industry, along with such statistics as 10 thousand seats deployed among 200 end-user accounts.
InfoWorld: What does an ISV need to do to become an ASP?
Alsop: In general, the application has to be Internet-ready, and they have to be prepared to deal with a business model. And I think the business model is the most challenging part; business model which emphasizes recurring revenue over time rather than a large upfront payment. And if they don't have the financial strength and stability to do that, they will have a bigger challenge. In the long run, I think the ASP model is going to be more rewarding for the vendor than the up-front payment model that we've gotten used to over the last 10 or 20 years, but initially, it's a challenge.
InfoWorld: What are some of those business challenges? Rewarding salespeople would seem to be something that people would need to address.