Prime Pickings for ASP Survivors

Reading rumors of dot-com doom can pay off with easy pickings for competitors of ailing companies, as Mark Goldin learned in October.

Reading rumors of dot-com doom can pay off with easy pickings for competitors of ailing companies, as Mark Goldin learned in October. One of Goldins co-workers at application service provider Inc., in Los Angeles, spread the news of competitor Red Gorillas falling fortunes. Both offered a Web-based time and expense application. Goldin, Elite.coms president, jumped at the chance to pluck new customers from his competitors ashes. "They were an annoyance to us, and we were wanting them to go out of business," said Goldin, who disliked that Red Gorilla offered a free service. "So we said, Why dont we get in touch with Red Gorilla and see if we can migrate people to Elite?"

It almost worked, until Red Gorilla decided to turn to another ASP for help. Ironically, by December Red Gorillas erstwhile partner, after having trouble with the migration, was calling to take over the former Red Gorilla customers. So far, Goldin estimates that has added 1,000 new customers paying at least $9.95 per month per user.

It just goes to show: One ASPs failure can be anothers business opportunity. A range of ASPs have found new customers in the ruins of competitors, either by seeking out the stranded customers or striking deals with competitors. Inc., of Woburn, Mass., gained about 11,000—or 35 percent—of the customers from failed competitor Inc. after the companies worked out a deal when closed in November.

For enterprise-application ASPs such as Qwest Cyber Solutions LLC, of Denver, though, just any competitors customers wont do. While Qwest hasnt struck any deals with failed competitors, CEO John Charters does see an opportunity to reach out to customers from struggling ASPs. But for Qwest, the target will be Fortune 2000 companies or their divisions rather than startups or dot-coms.

Qwest found one such match after the January demise of competitor HostLogic Inc., an ASP based in Boca Raton, Fla., that had hosted SAP AG enterprise resource planning software. The U.S. subsidiary of Belgium-based chemical processor Prayon Group turned to Qwest to host and manage the SAP software, which it will begin doing in May.

The interest for surviving ASPs, though, is more than just gaining more business. They also hope to prove to orphaned customers that the ASP model is viable and that strong providers remain. When BrassRing Systems, a division of BrassRing Inc., in Waltham, Mass., developed a transition for customers of failed human resources ASP competitor iSearch, it also emphasized the stability of its financial backing.

"An ASP can be a risky bet," said Tom Kramer, BrassRings vice president of marketing. "Its still a good idea, but just be very certain that the company you pick is going to be there month after month and year after year."