Edell faults himself for not spelling things out more clearly. In hindsight he wishes he'd taken employees on a three-day "vision" retreat. Instead, he gave a PowerPoint presentation to his staff to outline the ASP plan. He thought his vision was clear, as did his fellow executives. But the rest of the staff members were baffled by this new ASP product called eLabor.com that, according to Edell, was going to change the world. "There was a lot of confusion," says longtime salesman Dan Auge.
When salespeople demonstrated an early version of jeTech's ASP product in the field, they didn't see what all the hype was about -- and neither did some of their customers. That wasn't surprising since the early version looked just like the installed jeTech product. It hardly seemed worthy of the fanfare Edell had sounded in its honor. "They saw some product getting released that looked just like our old product, and they'd ask, 'What's the difference?" says Edell. "They didn't get it." Even after numerous informational meetings, sales staff would return from the field wondering what, besides the cost, were the benefits of a Web-based product. "It was hard for me to fathom why a company wouldn't buy the product the traditional way," adds Auge.
When the sales force finally did understand -- and start to sell -- the company's ASP solution, another problem emerged: how could the company motivate its salespeople to sell a three-year contract instead of a flat-fee installation? The sales staff was selling both versions at the same time but had little rationale to push the rental model, since doing so would mean smaller up-front commissions. Edell and the sales staff ultimately agreed on a compensation system in which the company would pay full commissions during the first six months of an ASP rental contract. (At press time Edell said he was considering paying them over 90 days.) That way, salespeople wouldn't have to wait three years to collect the commissions they previously would have received instantly on a sale.
Though Edell takes the blame for the communications gaffe, he attributes his company's bumps partly to its early entry into the ASP arena. In late 1998 there essentially was no ASP market, which placed a big burden on the company to explain the concept to both employees and customers. But the employees, it seems, finally do "get it," and eLabor.com has sold 20 Web-based deployments so far.
In addition, the company has yet to face any wrath from its legacy customers, who paid for on-site software installations before the company began offering its Web-based alternative. Edell doesn't anticipate problems, mainly because he's been upfront with customers about the switch, and because most of his customers seem to understand how rapidly technology changes.
But not everyone thinks it'll be easy for companies making the ASP switch to keep existing customers from feeling cheated. John Witchel, founder and CEO of San Francisco-based Red Gorilla, which offers Web-based time-tracking software, thinks established companies are at a decided disadvantage in rolling out an ASP model. "You have tons of customers who've spent millions on software. If you offer the exact same thing on the Internet for less, you'll have an absolutely livid customer base thinking it got ripped off," he says.
Other vendors, however, agree with Edell that customers are numb to the pain of frequent high-tech spending and are therefore unlikely to become angry when they have to spend more on new technologies. "When customers make an investment to build a data center, hire IT staff, and buy servers, they know that after a few years they'll need new stuff," says Allie Rogers, CEO of $10-million Triple Point Technology, based in Westport, Conn. "Over time, customers expect more users or volume on their systems anyway, which always means new purchases. There's no concept of making an investment and sitting on it." Though Triple Point's latest releases are deployable on the Web, Rogers says, customers are hardly champing at the bit for his company's Web-based products. "I still consider Web-based software two years away from wide acceptance," he says.
Jim Kizielewicz, vice-president of marketing for Kronos, shares Rogers's view that the ASP model will take some time to take off. Kronos launched its ASP offering in June. "We've had an ongoing dialogue with analysts, and the market appears to be extremely overhyped right now," Kizielewicz says. "Plus we weren't hearing about it from many of our customers."
The difference in opinion between Kizielewicz and Edell -- two guys in the same market -- illustrates the fallacy of generalizing about an industrywide trend like ASP deployment. Edell reacted to the model early for two reasons: he saw the technology's potential impact on his customers; and he realized that in his position -- as a small company competing with Kronos and Simplex -- he might miss the chance to capitalize on a historical change in the way customers purchase and use software. Right now it's difficult to judge whether eLabor.com is too early, right on time, or just plain wrong. What's clear, though, is that Edell is no longer quite the same old-school guy. "Well, now I'm kind of an old-school, new-school guy," he says. "New school when it comes to the model. Old school when it comes to making money."
Ilan Mochari is a reporter at Inc.
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