Providing application services has become the business model that dares not speak its name, but investors arent giving up on managed software and services.
"There is disdain in the marketplace about the label ASP, especially among financial analysts," says Ritu Raj, chief executive of Chapter 2 e-services.
Thats one reason the San Francisco company now describes its infrastructure as offering a global operating environment instead of using those dreaded initials, as it did upon launching last year. "We generalized it to reflect the fact we provide an operating environment for exchanges and other e-business systems as well," Raj says.
Pure-play ASPs account for about 40 percent of Chapter 2s business, with hosted enterprise resource planning and other e-services making up the rest.
Call Chapter 2 what you like; just dont call it poor: The company nailed $50 million from investors, including $15 million from American Express Financial in late January. Its enough money, Raj says, to take the company to profitability later this year. Chapter 2 will use the money to further develop intellectual property such as management tools, expand geographically and increase its sales and marketing efforts as it competes with rival LoudCloud.
"Operating infrastructure for all Internet-based business applications is going to be a huge, sustainable market, and companies in our market are going to become huge gorillas," Raj says.
But some gorillas, he cautions, might be getting huge a little ahead of themselves. "We have the same number of customers as LoudCloud, but only a fraction of their staff," he says.