In a dramatic illustration of the economies wrought by ASPs, AristaSoft implemented in 60 days what could have taken its customer up to a year to do on its own: namely, install a complete finance, distribution-and-logistics, and manufacturing software system, which AristaSoft now hosts, services, and maintains. AristaSoft CEO Drew Hoffman says that the company will eventually host 30 applications ("light, heavy, and medium"), for which it will charge customers from $5,000 to $30,000 a month, depending on the application and the number of users.
Software for the masses
Most players in the ASP space are going after the business-to-business sector of the marketplace, but not Cameron Chell, founder of C Me Run, a new consumer-oriented ASP service company that incorporated last November. At the age of 31, Chell is an industry veteran and the founding president of the ASP Industry Consortium. In 1996 he launched a business-to-business ASP. Today that company, the publicly traded FutureLink Distribution Corp., in San Francisco, has a market capitalization in excess of $1 billion.
Now Chell has teamed up with four FutureLink colleagues -- as well as Warren Talbot, who started up Microsoft's ASP licensing program -- to tackle what the founders think is an overlooked sector of the ASP boom: brand-name software for consumers. C Me Run will strike licensing deals with well-known software developers (Microsoft comes to mind, but the company is also in discussions with Corel, Lotus, and several game and educational developers, among others) and then host their applications for Internet service providers, portals, and telecom companies. In turn, these businesses will offer those bundled programs to their subscribers for monthly fees (ranging in price from free to $15, depending on the number and type of programs).
By serving the AOLs, MSNs, Qwests, and Yahoos of the world (the company is also in discussions with the second-largest ISP in Europe), C Me Run aims to alleviate what Talbot zealously describes as "the biggest civil-rights problem of the 21st century": access to information for general consumers.
Q&A
Mining for ASP Gold
Phil Wainewright, founder and managing editor of ASPnews.com, likens himself to "the guy who was already there selling the maps when the prospectors started turning up at the gold fields." Wainewright has tracked the emerging ASP sector full-time since October 1998, when he established his Web site to be "the source for ASP news and analysis." He recently spoke with contributing writer Alessandra Bianchi about the ASP gold rush.
Inc.: It seems as though everyone and his brother are calling themselves an ASP these days. How would you define an ASP?
Wainewright: People use the term ASP to mean many things, but from an end user's point of view, the concept is very straightforward -- an ASP is someone that operates software so that you don't have to. ASPs take care of all the complexity of getting it working in the first place and all the worry of keeping it working from then on. An ASP does all of that on its own premises and lets users access the applications across a data link, usually the Internet.
Inc.: Outsourcing is not a new idea. What makes ASPs different, and why have they suddenly become a hot opportunity?
Wainewright: ASPs spread the cost of designing their solution across several customers who all take pretty much the same recipe. As time goes on, that cost-sharing element is going to really drive prices way down, much more than most people currently expect.
Inc.: What about the broader business implications? Is the traditional software industry dead, as many headlines have announced?
Wainewright: People will continue to buy software but will get an increasing proportion of it via subscription or on a pay-as-you-go basis. The software industry believes the ASP model will make software more popular because it makes it easier to use, and with a subscription-based payment method, it costs less to start using it. But the established players are also worried it could mean a short-term loss of revenues while they change from the purchase model, where they get all their money up front, to a subscription model that spreads the revenue stream out over time. The more serious threat to traditional software players is over the longer term because new generations of software are much better suited to the ASP model than today's leading packages are.
Inc.: What are some of the smarter new ASP players doing to compete against the established giants who are also entering the ASP arena?
Wainewright: Start-ups are much better positioned than the established giants, who don't yet realize how much they're going to have to change to adapt to the ASP model. One of the biggest differences is that ASPs sell a service, whereas the computer industry has always focused on product sales. Building a sustained relationship with a customer takes a completely different mind-set. For instance, ASPs can monitor how customers use the software, and if they spot something that needs changing, they can do it right away.
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