Somebody Call a Spin Doctor
For many fledgling ASPs, its time to change. Early players now know that hosting general-purpose applications like Microsoft Word isnt going to pay the bills. Thats why many ASPs are spinning a new story and focusing on applications tailored to specific vertical marketssuch as health care, retailing and manufacturing.
Whats more, these new vertical ASPs are a heterogeneous group. Some of them, like retail specialist Tomax Corp., come from the software community. Others are experienced Web-hosting concerns or infrastructure providers that decided to pursue vertical strategies after getting their feet wet with other sorts of apps.
Which approach is better? It depends on whom you ask. Vicki Griffith, director of netsourcing at Lawson Software, expects that at least two types of ASPs will thrive in the vertical space. One group, she says, will host a preintegrated "end-to-end solution" across a specific vertical market. ASPs in the other category, she adds, will offer a single horizontal applicationsuch as accounting, human resources or customer-relationship managementacross multiple verticals.
At this point, though, some ASPs are still homing in on a narrower niche. Some, for instance, are providing e-procurement applications to manufacturing industries. Other ASPs, such as Agilera, are starting to roll out multiple horizontal apps across a number of verticals.
But whatever markets ASPs decide to target, and however they elect to target them, they had better know their stuff cold. For many ISVs entering the ASP market, this is not a huge concern, because they earned their vertical stripes a long time ago. On the other hand, companies that previously specialized on the infrastructure or hosting side will need to hire industry experts or partner up to acquire the needed vertical-market expertise.
The following examples illustrate some of the ways that ASPs are working their way into todays hottest vertical markets, and garnering real customers along the way.
Ring Me Up Tomax, a longtime expert in software for retail-store applications, is one ISV that is busily migrating to ASP status. It currently offers a Web-based solution called Retail.Net.
Tomax envisions Retail.Net as an end-to-end solution that can address store operations and workforce management, as well as customer sales through a variety of channels. These channels will include conventional POS (point-of-sale) terminals, Internet shopping kiosks, Web-based home shopping, and even the in-store use of wireless handheld devices.
One early user, the Guitar Center retail chain, is opting for self-hosting. But others, including Ratner Salons and ThinMillionaire, are relying on hosting services provided by Tomaxs partner, IBM Global Services.
"IBMs competency is about hosting. It is not about vertical apps Tomax built the Retail.Net software from the ground up," says William Grady III, program director for IBMs ASP Hosting Services.
Although built around the Oracle financial and CRM suites, Retail.Net is designed to be highly configurable to meet the needs of different retailers.
"We want someone who can support every keystroke," says Dennis Ratner, president and CEO of Ratner Companies. The company, which owns and operates about 800 Hair Cuttery, Bubbles and Color Works stores nationwide, is now starting to test the Retail.Net solution at Bubbles.
Ratner says he also was seeking an implementation that would integrate the chains existing POS terminals, which previously used a Citrix-based application. These desktop terminals, which face the stores receptionist, can pivot to let customers view the screen and schedule their haircut when they first walk in.
"Were expecting that Retail.Net will help us optimize the selection of stylists for customers. Well be able to track whos in the queue, and what kinds of services they need," Ratner says.
Time Is on My Side Meanwhile, some ASPs are targeting the professional-services market. Portera, for one, has coined yet another new acronym, VSP (vertical services provider), to describe this niche.
"Our customers are anyone who sells time for a living," notes Dave Jarrat, a senior analyst at Portera. Portera has signed up about 250 companies as ASP customers. They include independent consulting outfits such as MarketFitz and McLaren Consulting, and professional-services groups within large technology concerns, such as Commerce One, Inktomi and Juniper Networks.
"Professional services constitute the largest and fastest-growing segment of the vertical market," says Jarrat. "These companies dont like to make big capital investments in computer equipment. Theyre very mobile, and they need to be able to focus their efforts on client services."
MarketFitz, for example, is "about as virtual as you can get in todays world," says Jarrat. Very few of the companys 138 employees work out of headquarters. Most of the staff is deployed at customer sites around the world.
Portera sells subscriptions to its own ServicePort software, as well as to packages such as the Oracle E-Business Suite. Known as a PSA (professional services automation) suite, ServicePort also incorporates some third-party software, including WebEx for online meetings, and Docent for e-learning functions.
And, like Tomax, Portera didnt need to go out and hire people or ink partnerships to gain expertise in its chosen vertical. "Almost all of us have worked as consultants ourselves," remarks Jarrat. "So we know the pain."
Portera is but one of several xSPs in the professional-services space. According to Ray Rasmussen, MarketFitzs COO, the consultancy looked at other PSA offerings, but Portera won the deal because of its softwares core functionality, proven track record, scalability, reliability and universal accessibility.
Thank You, Uncle Sam Government deregulation has opened the door for more companiesincluding cellular and cable concernsto test the ASP market.
Agilera, an ASP based in Englewood, Colo., is now delivering a Lawson application suite to Rural Cellular Corp. (RCC), a provider of cellular, paging, long-distance and PCS to rural areas of the Midwest, South, Northeast and Northwest U.S.
The Lawson software includes financials, HR, payroll, budgeting and service-center applications. Rural Cellular is readying self-help call centers for customers as a way to reduce manpower needs. Plans also call for integrating RCCs existing billing software with the Lawson apps.
For its part, Agilera hosts and integrates software from many other ISVs, including an electronic bill payment application from Bottom Line Technologies; Rightworks e-procurement app; and offerings from Ariba, BroadVision, J.D. Edwards, Oracle, SAP and Siebel.
Eric Murphy, Agileras executive VP of business development, says the company has more than 70 customers across several verticals. "We also use a lot of middleware technology to be able to link to legacy systems," Murphy says. But Agilera typically teams with partners on back-end integration.
Heres to Your Health Care Lawson also has started to use ASP partners to move into the health-care arena. According to Griffith, the ISV has added "case cards" to its software, specifically for health-care apps. "If youre a patient and youre scheduled for a particular type of service, the case cards will ensure that everything needed is here," she says.
One of Lawsons ASP partners, HarborDental, already has launched a hosted service called eCheck-Up, designed to supply information to dental offices about their patients, as well as about accounting and payroll, for instance.
Sybase, too, is starting to work with ASPs as an entrée into new vertical spaces like health care. One of its partners, Micro Electronic Data Systems (MEDS), has used Sybases PowerBuilder tools to create a hosted application intended mainly for doctors who are performing independent medical exams in insurance cases.
Built around Sybases SQL Anywhere database, the app can be accessed from a variety of platforms, such as PCs or Compaq Computers iPaq handhelds.
Chain, Chain, Chain In manufacturing and other industrial sectors, supply-chain apps are one of the sweetest spots. By and large, ASPs are targeting front-end e-procurement apps, rather than the sorts of back-end e-logistic applications that entail heavy custom integration.
The Peregrine E-Markets Group (EMG) has fine-tuned its ASP offering even further, to focus on direct procurement. Steve Gaylor, EMGs director of solutions management, sees EMG as a delivery mechanism for messaging software produced by another Peregrine division, the Peregrine Infrastructure Management Group (IMG). EMG also will deliver applications from other ISVs. EMG is an entity formed following Peregrines acquisition of Harbinger last year. IMG licenses its messaging software to outside players.
Peregrines EMG already has integrated Calicos Marketplace software into its e-procurement application, for example. Future plans call for reselling IBMs Websphere Commerce Edition storefront.
EMGs clients include large corporations that no longer view procurement as a "core competency" to be hosted in-house, as well as smaller companies that dont want to make a big up-front investment.
Decisions, Decisions To meet the needs of new ASP deployments, many vertical-market ISVs are working on features that will add greater configurability for custom implementations. Lawson has announced two new features along this line. One of these, "multitenancy," is for secure hosting of multiple customers on a single set of Lawson applications. The other, "multipresentation," is for presenting different views of company information to various end users.
The ASPs, meanwhile, appear to be headed in a couple of directions: adding new capabilities to the apps theyve already launched, and moving into new verticals that share similarities with the ones theyve already entered.
Hows Your View? Agilera, for example, intends to use capabilities like Lawsons multipresentation feature to produce different views for a companys CFO and CEO. And Lawsons partner, HarborDental, has announced a new service called AbridgeASP, which will expand its client base to include small-business owners in related health-care markets like long-term care and assisted living.
Portera, another vertical ASP, has now moved beyond its initial target markets of consulting, marketing and advertising organizations into the government arena. Through a new subsidiary, Portera GC, the company added seven new government-contracting customers in Q4 of last year alone.
Meanwhile, Agilera also is eyeing possible expansion into other verticals, such as health care, with hopes of growing a customer base that already counts more than 70 companies.
Not My Business As Agileras Murphy sees it, organizations are keenly interested in outsourcing "non-business-critical" horizontal applications, especially when the ASP knows the ins and outs of how software is used in particular vertical markets. To give one basic example, a commercial ERP package popular in financial circles is a lot less likely to fly in the manufacturing space.
"Now more than ever," Murphy asserts, "its difficult for businesses to find internal IT resources. Weve discovered that companies IT departments often spend the lions share of their time managing applications like HR and e-procurement. Companies themselves, on the other hand, would like things to be the other way around. By outsourcing non-business-critical applications, companies can leverage the economies of scale of the vertical ASP model, while freeing up internal resources for the business-critical applications that really let the company succeed within its market."
The trick for most ASPs is to develop a vertical-market focusfast.