ASP Incubator Takes First Steps

Wilcam systems LLCs president and CEO, Gary Harbison, had the typical small- ISV dilemma: targeting larger customers with little more than a single product and a tiny staff—in his case, just six people.

The answer for Harbison came after a meeting with a distributor late last year. WilCam would evolve its corporate attendance tracking software into a hosted application, with the help of an incubation company that specializes in ASP (application service provider) delivery. Its a model that may appeal to small developers, although industry insiders contend incubators are an unproven—even shaky—way to grow a hosted apps business.

Skepticism aside, Harbison said he feels strongly about working with ASPn (pronounced “Aspen”) LLC, a Southfield, Mich., incubation company for ASPs, set to launch in January. The company is the brainchild of investment banker Rick Pulford, who, by his own admittance, doesnt like to invest in startups—even though hes “done seven or eight” since 1990.

“[ASPn] helped us develop a strategic plan; they are hooking us up with clients and with some very powerful marketing people. They acted as a marriage broker,” Harbison said. “We are now developing the ASP product that we can deliver via the Web or on a companys intranet.”

Pulford takes a more pragmatic view.

“What I saw is the ability to take scads of money out of the cost of running an ASP,” Pulford said. The reason he founded ASPn, he said, is because “Im in the money business. … This made eminent sense.”

The ASPn deal began after Pulford invested in Integrated Business Systems & Services Inc., a privately held company in Columbia, S.C., that makes enterprise application integration software. When IBSS executives realized their product could be adapted to ASP enablement functions, an incubator was born. Now, Harbisons WilCam is the ASPn/IBSS teams first customer.

Recognizing his own lack of technical knowledge, Pulford said he is placing his trust—and money—in the hands of IBSS. Besides giving financial help and designating IBSS as the exclusive technology partner, ASPn plans to offer new ASPs and software vendors moving to the ASP model assistance with marketing, lead development, training and technical support.

“The company was started to exploit the technology that IBSS possesses. I see it as the safest thing Ive seen in a long time,” Pulford said.

As IBSS Vice President Don Futch put it, ASPn will focus on “all the nontechnical issues that help a smaller company become a bigger company.” Within IBSS, Futch said, “we had some conversations. … We began looking at how we could place our technology in a shared way to attack the ASP market. We tend to focus on the point-specific verticals.” IBSS Synapse business-to-business product, he said, will also help ASPs integrate hosted applications into the supply chain.

While optimism abounds from Pulford and Futch, outside experts are not as certain about ASPns chances for success. “I dont think theres much market for it, after the air came out of the dot-com bubble,” said Kneko Burney, an analyst with Cahners In-Stat Group, in Scottsdale, Ariz. “A lot of incubators are hand-holding their investments and relying on the talent of them, rather than the soundness or the longevity of the deal.”

According to Fred Hoch, an official at the Washington-based Software and Information Industry Association, the reason there arent more ASP-specific incubators is that the concept emerged wounded from the recent dot-com shakeouts.

“The dot-com incubators had too much money and not a solid business model. Dot-coms gave them the promise of a business model when it wasnt there,” Hoch said. “For an incubator to grow, they need a champion … there havent been many.”

However, Hoch said, there are things that ASP incubators can learn from their dot-com predecessors. “They can nurture those companies to grow slowly with profits in mind,” he said. “The ones that teach executives of those companies what they need to know about growth will have good opportunities.”

ASPn faces competition on many fronts, such as traditional venture capitalists and incubation companies. As for being an ASP-specific incubator, however, ASPn has one primary competitor: Canadian company Chell Merchant Capital Group. Chell, based in Calgary, Alberta, is led by founder, CEO and former Olympic decathlon hopeful Cameron Chell.

Chell was unavailable for comment regarding ASPn. However, a Chell representative noted that the company has spawned three fledgling companies since its August 1999 inception, including FutureLink Corp., a major ASP for the enterprise based in Lake Forest, Calif.; cMeRun Corp., a Hudson, Mass., consumer and small-business ASP; and Jaws Technology Inc., an ASP security company located in Toronto.

ASPn officials, however, insist that neither Chell Merchant Capital, nor any other company, is their competition. By focusing primarily on vertical markets and “people that have their own little niche,” ASPn will only compete with other ASP enablement and infrastructure providers, Pulford said. In addition, ASPn will announce its CEO early next year, officials said.

“Were not going head-to-head against competition,” IBSS Futch added. “Were mining untapped verticals.”