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ASP business model anyone?

A colleague of mine is obsessed with the idea that the Application Service Provider business model will dominate the market of ISVs in the short term (18-24 months).

But I don't see myself offering my apps as an ASP (they are web based though).

What do you think ?

Discuss!
Wednesday, July 21, 2004

Your colleague is an idiot.

End of Discussion.

Mr.Fancypants
Wednesday, July 21, 2004

... and when I was working for a business consulting company about 8 years ago, I remember someone (who was employed as a technology guru and paid shed loads more than I was) at a technical strategy meeting saying that we needn't upgrade the consultants PCs as within a year everything would be done with OpenDoc components so everything would have slimmed down nicely.

Not that the company was around after that year anyway, but that's another story...

Harvey Pengwyn
Wednesday, July 21, 2004


My company does hosting for quite a few applications for other groups.  We provide all the customizations, maintenance, upgrades, etc.

For certain things, this makes perfect sense.  For example, timesheets, various workforce management things, etc.  Anything that requires a constant db connection, there may be a case for it.

As a replacement for Word/Excel or Open Office?  Nah, still unlikely for now.  A user wants to be able to still work while they're unconnected from the network...  such as I am now.

KC
Wednesday, July 21, 2004

I developed a product that could be sold under the ASP model a few years ago. Luckily it could be sold and installed easily in a client/server (or n-tier really) model or we wouldn't have made many sales. The real road block that I found was the availability, reliability and price of fast broadband.

Craig
Wednesday, July 21, 2004

I worked for a company that did an ASP model (http://www.mymarket.com/) Please do not judge me by any of the HTML you are going see on the site. The stuff I was involved with is way in the backend. I just tried to get into the "About Us" section, but the Nav was broken.

The software that we provided, Commerce One's NetMarket Maker, was not writen by us (allthough heavely coustomized, and that where I fited in), there by still leaving space for ISVs.

The busness was all about Service. Helping suppliers set up there catalogues, helping buyers set up there approval systems, ect.

I was one of a few devlopers in a big opperations team, and  I had Account Manegers shouting to each other accross my desk. I complained, it didnot change, I left.

Gary van der Merwe
Wednesday, July 21, 2004

They don't call it ASP model any more. I think the correct term is "on-demnad" model. :)

Anon
Wednesday, July 21, 2004

> I think the correct term is "on-demnad" model. :)

Yep, that's how Oracle call it.

I'm not talking about replacing common office tasks with ASP applications. But... what would be the beneffit of offering an application like, say, FogBugz under an ASP model ?

I really don't see it happening, what's the advantage, if any, from the client's perspective?

I develop logistics software and this guy is telling us to think about deploying an ASP based solution. And no he's not an idiot with an MBA repeating some Forbes article but a very capable tech guy.

Anyway, my opinion, is that it's not worth the effort, I don't see a market here.

Is anyone here playing in the ASP arena ?

Discuss!
Wednesday, July 21, 2004

"But I don't see myself offering my apps as an ASP (they are web based though)."

What is the architecture of your product then?

Do you run a web server / app server at each client and deploy code to each client also?

Genx'er
Wednesday, July 21, 2004

> As a replacement for Word/Excel or Open Office?

My call is that Blogs, Wikis and Email are the web replacement for Word Processors. The amount of documents I now write in word is close to zero.

Matthew Lock
Wednesday, July 21, 2004

Where I work we use a system that is leased from an ASP. We are moving away from it as quickly as possible. We do insurance so we have to prove our stability/security to investors/re-insurers and the government. We have a laundry list of reasons we are getting away from the ASP model. Some key reasons are:

We cannot find an ASP that will provide us with a daily data backup in case their company fails, nor will they provide us with a copy of the system should their business fail. All our backup is in what we print from the system, the printing costs are becoming staggering. Our stability, growth, security, and general future is determined by this ASP company's survival.

Also I have been unable to find an ASP for our industry that allows you to extract your data out of their system so you can move to a competitor. If I decide to move our company from MS Word to Open Office I can find a converter for all the different file types, however I am contractually bared from writing a converter to move to a new system. One contract I reviewed even said I could not run network traffic between the desktop and their application server through a network intrusion detection system since it may store their proprietary information. Also since it was web based, they wanted the cache on the desktops set to zero. Needless to say we won't be dealing with that company even though they are much cheaper then their competitors.

The best model I have found so far is an ASP where I can have the low startup cost of leasing the system. I am exposed to all of the above but once I have enough money, I can buy a copy of the sytem once the company is proving itself viable. Once I buy the system I am then free to move my data to a competitor. So in the end the financials for the company are the equivolent of leasing a car. I get low upfront costs, but if I want independent ownership I have a hell of a balloon payment to make.

For us the balloon payment was more then the cost of writing the application ourselves and maintaining it for 4 years.

Are there any ASPs that avoid these pitfalls we have in the insurance industry's ASP market?

Jeff
Wednesday, July 21, 2004

Your friend is right.  Just take a look at all the websites that end in .asp.  Jump at the chance.  Get in on the ground floor.

.net, the equivalent of MS Bob.
Wednesday, July 21, 2004

> What is the architecture of your product then?

IIS and SQL Server. Installation via typical install wizard.. nothing fancy.

Most customers can install and run the system without our assistance, but we provide free setup if needed.

Discuss!
Wednesday, July 21, 2004

Your colleague sees the dollar signs flashing in his eyes when he thinks of that business model. To minimize your risks, you want to lock in your customers. For your customers, that is a dangerous place to be: all your eggs in someone else's basket.

One of the above posters pointed out the risks involved from an end user point. More than a few ASP providers went belly up and their clients lost control, ownership of, and access to their own business data.

From a risk management point, subscription software (of which "on-demand" or "ASP" are just samples of) are highly risky. I personally would strongly advise any company I work with to stay away from them at all costs.

Peter
Wednesday, July 21, 2004


Actually, in the interests of the customers that we host for and to give them some peace of mind, I convinced my boss that if we go under (unlikely) or other specific requirements are met, then the source for the app goes to them.


Therefore, they gain the ability to support, maintain, or just discect the code in a worst case scenario.  Of course, they do not have redistribution rights of any kind as a result of any of those scenarios.

KC
Wednesday, July 21, 2004

Discuss!

There are advantages and disadvantages to your architecture.

The more clients you get the more involved & complex deployment becomes. ASP are fairly easy to deploy. COM components = DLL hell and Schema / Data changes need to be done very carefully to say the least.

In the ASP model, you only have to make such changes to one system. However in your situation, if you had 500 clients, you would need to deploy such changes to all 500 systems.

Deployment can get very complex...

Genx'er
Wednesday, July 21, 2004

IMHO the ASP model is something that in THEORY great but when you actually try to do it in PRACTISE it just ain't what it promised.

What if an ASP actually did it right? For example:
* they used lots of DHTML trickery to provide an improved web interface
* gave you the facility to download a backup whenever you wanted, even daily
* provided a service where the small monthly payments was much better than a big up-front payment.

Herr Herr
Wednesday, July 21, 2004

Genx'er: I think you are confused. We are talking about the "Application Service Provider" business model, not the "Active Server Page" technology.

Jeff: As I mentioned, at mymarket we were different to most ASP companies, in that we were using software sold to us from an ISV, not software we had written ourselves. So our clients could have easily bought there own copies of the software, although the price for it was extremely expensive.

We also use to assist out clients import data from our system into their finical systems. That was a big selling point for us. In fact, our selling point was the service that we offered, not the software.

Gary van der Merwe
Wednesday, July 21, 2004

Ok so deployment gets more complex as you move away from an ASP model. Thus among other reasons, like shared resource costs, the price for each end user should be less then running it on their own. The cost savings to the ASP is great compared to other deployment and sales models. The problems start to show when you are a customer leasing an ASP product that supports you core business.

Now in an ASP system I get the biggest balk when I say, "Prove to my security auditor that any of your other clients can never see any of my data, since your other clients are my competition." In effect to do this the ASP needs to allow my auditor deep within their system, something they are often loath to do. Also I now have to spend a bunch of money to prove I am safe from my competition.

Also another interesting component of ASP providers is finding out who really owns them, often it can be your competition. What happens to your data when the parent company closes the door on the ASP can be a troubleing thought.

What I want to know is besides lower costs is their any other benefit to using ASP software?

Here is something that really sucked about using an ASP. I security audited a system once for a company, they were going for second round investors who wanted to be assured the system was secure. The company got permission from the ASP to audit the system, essentially they said yes to allowing me to try and find any holes in their security. The only way they would allow this to happen was if they got the report before any of the investors did by one month. I found stunning problems, essentially Oracle reports cgi module was totally unprotected and I could view the cache of all reports run on the system. In one of the reports I found the URL that linked to an internal report that was protected by a web based login system. The URL contained the user name, password and database name of the systems database. Connect to it with oracle client and I come to realize the user I am logged in as has full rights within the database. They get a copy of the report, panic and cut off the company's access to their system. Sure court cases later the ASP had to pay up but the startup company was pretty well destroyed at that point. Interesting thing is the ASP is still in business and for some reason has never fixed their security problems!

Jeff
Wednesday, July 21, 2004

"Genx'er: I think you are confused. We are talking about the "Application Service Provider" business model, not the "Active Server Page" technology."

No actually I am not confused!

The company I work is a Application Service Provider that has Web Application that was originally built on Active Server Pages.

I asked the user known as "Discuss" what architecture he uses in his application which is not a Application Service Provider application. He said he uses "IIS and SQL Server. Installation via typical install wizard.. nothing fancy."

From what I understand, basically he uses Active Server Pages and deploys the pages, COM objects & schema / data changes to each of his client's servers.

The point I was trying to make is that having an architecture like this can lead to very complex deployment when you have hundreds of clients. Updating hundreds of IIS servers & SQL Servers.

If you have the Application Service Provider architecture you only deploy to one place.

Understand?

Genx'er
Wednesday, July 21, 2004

Genx'er: Sorry, I was confused.

Gary van der Merwe
Wednesday, July 21, 2004

Genx'er

Point taken. I understand what you mean.

However, right now our customer base is about two dozens clients and cost of deployment is not an issue, we offer an online service for downloading and applying patches and we also use remote terminal access if necessary (very seldom).

But you're right, this model does not scale well to big numbers.

The 1 to many deployment model of an ASP application is one of the obvious advantage for us (ISVs) but my inquire is to know any success story from the client's point of view.

Very insightful posts, thank you.

Discuss!
Wednesday, July 21, 2004

Discuss....

No Problema....

We are using similar technology as you are, however, we have 600+ clients using our Web Application.

Obviously deploying our app to all of these clients would be a nightmare...

Genx'er
Wednesday, July 21, 2004

The problem with shipping your app to be installed at a customer site (shrinkwrap, or shrinkwrap-ASP) is that you end up with them being about 8 releases behind because they tossed the CDs on the shelf rather than install them. 

You have to change your support policies to handle this situation ... when they call with a problem, you have to look up in your bug-tracker database, and be prepared to tell them "That was fixed two releases ago.  Please install the disks we sent you in the correct order, and call us back if you still have a problem".

example
Wednesday, July 21, 2004

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