ASPects: April 2, 2001

By eweek  |  Posted 2001-04-02

Bad News Is — Bad News

Some big-name application service providers are claiming that the sagging economy will actually do them good, as companies looking to reduce capital expenditures will gravitate to the low cost of entry promised by ASPs. Well, maybe. Im all in favor of looking for silver linings, but that doesnt mean you should ignore the storm clouds. Any boost from the new cost-cutting mentality is likely to be more than offset by the popping of the dot-com bubble and the first-mover, do-it-yesterday mindset that was supposed to fuel ASP growth. Software-as-a-service companies have been scuttling away from dot-coms since last year; suddenly, everyone is all about the enterprise, but now those enterprises are sucking wind, too. Attracted the big companies may be, but for ASPs built on the premise of explosive growth, the capital crunch cant be a good thing, much less the basis of a marketing campaign. Worst of all, the battered Nasdaq and overall economic downturn with no end in sight could threaten the young ASP industry by putting its credibility at risk. A highly visible bankruptcy or two, especially ASP-related events that strand customers, could shake confidence in even relatively healthy companies and further stunt the slower-than-expected growth of the whole business. Bad economic news doesnt hit every company in the same way, but Ill take good news any day.

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