ASP market opportunities prompt moves by established players

THE LATEST MOVES in the crowded ASP (application service provider) space prove that even traditional software and systems vendors are not immune to the emerging model's lure.

In fact, top-tier vendors are busily tailoring their established business models to snare a potential customer bonanza within the ASP market.

Novell and Hewlett-Packard last week proclaimed ASP-driven initiatives, and Lotus will amplify its own next week.

Observers say that these established players-cum-ASP companies are counting on customer loyalty to help them vie with the extensive networks of smaller, more specialized participants.

But for now, the established vendors must endure a learning curve while their size and legacy technologies somewhat impede their early ASP efforts, allowing smaller ASP specialist start-ups to gain ground on their deeper-pocketed rivals, said Amy Mizoras, an analyst at Framingham, Mass.-based IDC.

"For a lot of [customers], their legacy companies are becoming a liability. They are less agile than the start-ups, [which] don't have the same architecture issues" limiting responsiveness, Mizoras said. "In time that will change and that advantage will go away. Then it comes down to [best] service and price."

One customer identified challenges facing the old guard.

"Right now they have enough on their plate relative to the market they're in without trying to adapt to [serving] a partner venue," said Richard Arns, executive director of Chicago Research and Planning Group, a group for CIOs.

Old-guard ASP push

HP and Novell have intensified their respective ASP efforts.

Novell OnDemand Services:

Service/content billing

DirCommerce billing engine

Usage tracking

eDirectory security, management

HP e-Utilica:

Deployment of hardware/software

Security

Novell last week pitched its OnDemand Services hosting and billing software as ASP building blocks. The company is moving toward a "subscription" or utility-type model, where it will act as a centralized middleman to link customers with ASPs, providing services to both parties, said Eric Schmidt, chairman and CEO of Provo, Utah-based Novell.

OnDemand will be at the heart of Novell's ASP services, augmented by its caching technology, iChain security, and e-business services, which are due this fall, as well as its planned NDS Web portal, called Blackhawk.

Cambridge, Mass.-based Lotus is also trying to cash in on the white-hot ASP market. The company finally formally unveils its ASP version of Notes/Domino next week, and is expected to announce partner agreements for hosting the software.

The upcoming introduction reportedly will underline the company's belief that software increasingly will be delivered to users much like services.

Given that many larger IT shops are looking to outsource major applications, some analysts believe that these ASP announcements from top-tier players are well timed.

"Where there is a new market area and the customers have some sense of uncertainty, they tend to go to a safe choice, and the safe choice is a name that [users] recognize," said Greg Blatnik, vice president of Redwood City, Calif.-based Zona Research. Blatnik said customers prefer having one point of contact and should choose a vendor with a portfolio laden with additional services to offer.

Shortly after it launches the ASP version of Notes, Lotus is also expected to introduce a service for corporate and third-party developers. The services will allow them to embed a number of different Lotus technologies in their applications and then be able to call on those applications over the Web, sources said.

Hewlett-Packard is taking the less overt path, supplying the hardware and software backbone for service providers. Through its e-Utilica program unveiled last week, the Palo Alto, Calif.-based company will begin offering service providers scalable hardware and software bundles for building application hosting services, according to HP officials.

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