Lights Out for Pure-Play ASPs

As prospects dim, Futurelink focuses on professional services.

Pure ASPs are a dying breed. Struggling with revenue growth, tanking stocks and an uphill battle to make hosted applications a corporate mainstay, many ASPs continue to shift their initial focus to stay alive.

While dozens of those ASPs already have fallen, under the icy glare of Wall Street, a number of others have cut staff and burrowed into tried-and-true sources of revenue. Futurelink, one of the early pioneers of the ASP model, is moving away from its pure ASP focus and turning to professional services for its bread and butter to reach the break-even point by the end of the year.

Futurelink, which bills itself as the "application utility company," is realigning, emphasizing its other services such as IT staffing, e-business consulting, training and application development over ASP-related services. It recently cut 50 jobs.

Professional services generated 70 percent of Futurelinks revenue, about $91.4 million, for the nine months ended Sept. 30, 2000.

FutureLink CEO Howard Taylor recently noted that the "wild forecasts" for ASP growth have not materialized.

However, Futurelink is "still committed to the ASP marketplace," insists Dorothy Farris, senior VP of marketing and channel sales, but it plans to deliver IT solutions to suit each customers taste. She adds that the companys professional-services arm will be responsible for selling Futurelinks product offerings, including ASP services, to current and new customers.

Many ASPs are rethinking their business models, says Yankee Group analyst Carrie Lewis. Service providers are "all moving upstream and building out professional or value-added services," she says.

At the same time, many ASPs are cutting their costs. LivePerson slashed 60 posi- tions last month, USinternetworking cut 150 jobs, Telenisus chopped 70 positions, and Breakaway Solutions dismissed 30 percent of its staff.

Cameron Chell, who founded Futurelink in 1998 but severed ties late last year, believes ASPs are taking a risk in bowing to Wall Streets demands for profits. "Im blown away by the shortsightedness of companies that are succumbing to the demands of Wall Street," says Chell.

Meanwhile, ASP competitor Corio plans to stick it out. "I think Futurelink finally realized they want to be in the professional-services business," says Mitch Kristofferson, Corios VP of marketing. "Corio is going to stay in the ASP business."

Still, many old-line companies werent foolish enough to go public before generating profits. The same cant be said for money-losing ASPs that went public during the dot-com boom. For some, it might be lights out—forever.