I Gotta Be Me

ASPs are finding that differentiation is a key to their survival.

As the overall fate of the ASP market remains up in the air, individual providers are trying harder to nail down solid outposts in this quicksand-like turf. But those that are staying afloat are getting a little bit of help from their vendor partners.

While dozens of ASPs have gone out of business, and some like Agillion have recently been put up for sale, others are tenaciously hanging on. Offering more than a vanilla solution is not enough. The next logical step often involves joining a vendors ASP program to stand out from the crowd, at least for the short term.

Different Strokes Intels recently unveiled ASP Accelerator Program, for instance, is designed specifically to help ASPs differentiate themselves, according to Greg Brown, Intels service-line manager for hosting services. Open to ASP members of Intels AppChoice Managed Hosting Service, the program revolves around branded sales materials, partner/customer matchmaking and, in some cases, market development funds.

IBMs ASP Prime, a program for ASP-enabling ISV partners, is now moving beyond the purely technical by piloting classes on how to build a business plan. IBM is asking ISV partners to " think through applications, partnership strategies and the impact on their existing business," says Jill Kanatzar, manager of IBMs ASP Prime Program.

After completing ASP Prime, ISVs get a choice between self-hosting, hitching up with IBM Global Services or pairing up with graduates of IBMs Hosting Advantage program, says Ann Reiten, IBMs ASP global business area leader.

In the case of Microsoft, certification is a key to recognition. The company, which has honed its partner programs for solutions providers and has cast certification as the holy grail that helps partners succeed with customers, is taking the same road with its ASP program.

The Turning Point Obtaining advanced or "Gold" certification from Microsoft is the best way to emerge from a crowd of ASP hosters, contends Rosa Garcia, general manager of Microsofts Partner Programs Group.

But differentiation wasnt always such a big deal for ASPs. "Earlier on in the cycle, many of the requirements were kind of me, too. You just needed to give [the same] level of service and support as other ASPs," says IBMs Kanatzar.

Differentiation has become more important for the fledgling ASP market, as many have had a hard time creating top-line growth and profitability. Amy Levy, an industry analyst at Summit Strategies, pinpoints the past six months as the turning point for ASPs. Ever since then, investors have been pushing ASPs to prove unique "value propositions," says Levy.

Experts agree, though, that a vendors "stamp of approval" isnt worth much—unless the vendors program requirements are rigorous.

New Targets Meanwhile, the ASP also needs to carve out its own, well-chosen unique space. "But you shouldnt just differentiate for differentiations sake," says Lew Hollerbach, managing director of the Aberdeen Group. "You cant achieve differentiation simply by slapping on a new company name or logo. Instead, you need to consider what will really make you different from anybody else."

For better or worse, just about every ASP is now articulating some sort of differentiation strategy. One popular school of thought touts highly specialized apps targeted at particular vertical or horizontal areas.

Customer size is another criterion. IBM partner Auxilor Corp. sees adding ASP services as a way to bring smaller companies into its customer fold. Auxilors Lotus Domino-based help-desk software already is being licensed by 130 big enterprises, ranging from Hallmark to Milwaukee Tool, says Auxilor president R. Alan Forbes.

On the other hand, ManagedOps, Qwest and USi—Microsofts first three "Gold" ASP hosting partners—all are setting their sites on the midrange market.

ASPs like Frontera are targeting application customization. "Frontera is one of the few ASP partners that builds, hosts and manages custom apps built on BEAs WebLogic E-Business Platform, Commerce and Personalization servers. There are, however, a number of ASP deals for WebLogic besides our own," says Frontera marketing VP Tonya De Gance.

But not everyone is a customization fan. Customization can mean practically>> endless ongoing costs around development, maintenance and user training, according to Preston Dodd, an analyst at Jupiter Communications.

Many larger ASPs, including Qwest, instead are underscoring the "scalability, reliability and availability" of their infrastructure platforms. "We believe its all about scale. The [ASP] industry is moving away from mass customization, " asserts Kevin Koche, VP of Aptimum at Qwest.

Hosters also are emphasizing the characteristics of their channel partner programs as differentiators. "We want our partners to be seen as people who can provide the full gamut of hardware, software and services, versus just being the guy who sells the boxes, " says Simon Angove, senior director of product management for a-Services, a managed service run by Cable & Wireless, Compaq Computer and Microsoft.

Angove contends a-Services is different because it supplies partners with everything from client hardware to technical training, support, a "partner advocate" program and "warm" leads. In its first few months of operation, a-Services has signed on 400 channel partners.

Still, its crucial for providers of all sizes to focus on meeting the real business needs of end customers, says Aberdeens Hollerbach. "Its best to choose an area thats underserved," the analyst suggests.

HostPro appears to be doing just that. After building up a large e-mail outsourcing business, HostPro hired Intelliquest to conduct a survey, says Rob Maupin, area VP of product development.

Results showed that 59 percent of HostPros customers felt a need for a messaging, collaboration and calendaring service based on Exchange 2000 and Outlook 2000. HostPro then launched its Advanced Messaging ASP service.

Now, will customers come?