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The return of the ASPs
While the initial public offerings of Google and
Tata Consultancy Services have understandably been given top billing
by the media, I’ve been considerably more intrigued by a much
smaller outfit that successfully went public recently—Salesforce.com.
Intrigued not so much because Salesforce’s flamboyant top dog
Marc Benioff zips around the office on his Segway scooter, or because
Benioff’s pet dog Koa is designated as the company’s chief
love officer, but because Salesforce has proved that a software
products company can survive and thrive on an alternative business
model.
The model I’m referring to is that of application service
provider (ASP)—a genre of company that rode the dotcom boom-to-bust roller
coaster—from giddy heights a little before the turn of the century, to
depths of despair less than two years later. What was initially touted as the
Next Big Thing in a maturing software industry wherein software would soon be
provided much as a utility on tap, quickly disintegrated into an anachronism,
with most ASPs falling embarrassingly by the wayside.
Simply stated, the pioneering ASPs promised the functionality
of sophisticated enterprise software to users, but without those users having
to bear the burden of exorbitant upfront licence fees. ASP data centres urged
you to farm out part or all of your enterprise applications to them, along with
the requisite network infrastructure as well. Unfortunately, economies of scale
were hard to come by, as the ASP had to effectively create a separate new infrastructure
for each new client, thus making the model unviable. Further, integration with
other applications of the client was near-impossible back then, and the resultant
mess inevitably gave the whole ASP concept a bad name.
But offering software as a variable cost is just too compelling
a proposition to simply disappear. While bigwigs like IBM and HP continue to
work towards the Holy Grail of ‘utility computing’ that will likely
become the norm for large enterprise users some day in the future, a new generation
of smaller ASPs is targeting the mid-market by creating software applications
tailored for deployment over the Internet.
Salesforce.com is the proud flagship of this brave new brigade,
and the company has all but stood the customer relationship management (CRM)
market on its head. Salesforce offers its CRM software on rental, currently
at $65 per user per month. The client company just adds on or terminates subscriptions
depending on the numbers of sales people it has on the rolls in a particular
month, and Salesforce correspondingly just creates or deletes accounts on its
servers. The simple browser interface ensures quick learning for new users,
who typically access the software from a Web browser anywhere.
Leaders of the $7 billion CRM industry like Siebel and PeopleSoft
(long fattened on the traditional ‘upfront-licence-fee + regular-upgrade’
model of the software industry) have pooh-poohed Benioff and his promises of
“freedom from software”. But they’ve also quietly gone ahead
and kowtowed to the ASP model by offering similar pay-per-use options to smaller
customers. The success of Salesforce has spawned other rivals too, like SalesNet,
RightNow and NetSuite, all clamouring for a few morsels of an expanding pie.
It’s a sign of the times to come. A recent IDC survey
reveals that almost half of the software vendors polled believe that subscription
licences will account for a majority of their revenues by 2010. This trend,
while unlikely to play out overnight, is being spurred by frustrated customers
who have in the past overbought software and then been forced into the vicious
cycle of upgrade, redeploy and retrain—often with questionable returns.
However, before enterprise software can be hawked purely
as a service, what needs to become more widespread and standardised is the concept
of Web services. Don’t confuse this term with ‘services on the Web’
(like what a Salesforce, or say, Yahoo offers). Web services are in effect a
set of standards that allow interoperability over the Internet among applications
that are compliant with those standards. Sadly, competing standards from rival
camps are still stifling the widespread acceptance of Web services.
Meanwhile, on the ASP front, another tiny company in the
US is beginning to create a few ripples. It’s called SimDesk Technologies,
and it offers users access over the Internet to a basic office suite including
word processing and spreadsheet software (compatible with Microsoft Office)
along with storage on its servers, for a nominal subscription amount every year.
Nothing revolutionary about this, except that SimDesk has managed to sign multimillion-dollar
deals with the state of Indiana and the city of Houston in the US. These local
authorities then provide the SimDesk service to residents at a very nominal
yearly charge.
Corporate India rejected the ASP concept in its original
avatar. But now, as we attempt to bridge the vast digital divide in India and
take computing to the masses in our country, a model similar to the SimDesk
one could well turn out to be the most practical and affordable. Of course we
have a long way to go before we increase PC and Internet penetration and crack
the multilingual issues and leap over all the other hurdles, but here’s
where our growing community of open-source software enthusiasts and Linux experts
could play a significant role. At the very least, a start could be made at the
government level, what with the billions of rupees being poured haphazardly
into e-governance projects in every state.
Back in the eighties, we had our very own indigenous “4-5-6”
spreadsheet software. Perhaps the time has not yet come to reinvent the entire
software wheel, but we’ve got nothing to lose by attempting to roll the
software licensing dice differently in this country. Place your bets!
Val Souza, Editor
valsouza@expresscomputeronline.com
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