Getting Any Foot in the Door

Struggling for customers, some ASPs are now courting solutions providers.

Pat DAngelo, the president of Alliance Commerce, a Florida ASP that provides Internet-based business software applications, says hell never give up on directly reaching out for new customers. But if a major systems integrator or solutions provider offers to sell Alliances services to its clients, DAngelo wont think twice.

Like many other ASPs, Alliance is finding that going it alone—trying to gain customers merely through advertising or other forms of marketing—is not a smart move. Telemarketing and direct-mail offers are not enough.

"If Perot Systems or EDS or any integrator calls me today and asks me to provide their clients with services, Id be more than happy to do it, even at a discounted rate," says DAngelo. "Having those names to use in marketing goes a million miles. Sure, you have to give up a piece of the pie, but ... it goes a long way."

Still, theres a risk in partnering. When solutions providers become middlemen, they might take away some revenue from ASPs. On the other hand, by routing customers to an ASP, the solutions provider might be forfeiting revenue it once drew through software sales.

And customers already shaky about outsourcing their precious data might be even more squeamish if the separation between themselves and the software is lengthened by the solutions providers presence, those in the field say.

"The hardest thing Ive had with ASPs coming in is actually coming up with a model that works for the ASP and the integrator," says Ed Hunter Jr., president of Downtime Inc. He says his company has "no such deals in place," but he believes the partnerships can be mutually beneficial.

"What an ASP is not going to provide is any onsite services," observes Hunter. "If there are any environmental changes in the customers network, the ASP is not going to be able or will not want to deal with them. So having an integrator through which any sort of physical deliverables are going to happen is sort of mandatory."

Hunter doubts whether a healthy systems integration company is going to suffer by lost software sales. However, being able to offer customers remotely accessed applications can add to an integration companys customer satisfaction.

Mi8, an ASP that has partnerships with diverse companies, including systems integrator OAO Technology Solutions, uses both direct sales and channel sales.

"I dont think we moved away from [direct sales], but were monitoring what gets the best traction," says Mi8 VP of business development Bruce Kern. "If direct sales are giving us the greatest results, thats where well allocate our business."

But Kern concedes channel sales are softer than expected.

Then again, so is the ASP market.