ASPs are Back!

ASPs are back!  They go by different names, current buzzwords being “Cloud Computing” or SAAS, but make no mistake these new companies are the beginning of a trend that we saw put on hold for nearly 10 years.

In 1999 I wrote one of those long “thought pieces” about the future of datacom-driven business services called “Beyond the Internet.”   The premise was that the explosion of datacom infrastructure, hosting, local broadband, long haul broadband, etc. would become the underpinnings of an entire new class of services – “application service providers” that would free companies from having to assemble, scale and maintain expensive comm infrastructure and deploy capabilites in a fraction of the time it would take to develop in-house with traditional technology and methods.  It also opened the door to allow for the creation of services that could only exist in a shared customer environment (for various reasons we won’t discuss here – but are critical to the future of ASPs, SAAS, Cloud Computing or whatever you want to call it.)

The vast majority of these would be B-to-B services – and the early adopters turned out to be venture-backed internet startups that were motivated by the upfront savings, speed to getting functionality and that were much less likely to have legacy issues to overcome technologically and more importantly culturally.

It was a precient piece… for about 20 minutes.

Companies such as Akamai, StorageNetworks or Loudcloud hinted at the potential of this model.  But the dotcom bust spelled the end to the bread and butter customers for many of the early ASPs – long before more traditional customers were ready to make the leap necessary to take up the slack and most of the early ASPs faded away.

Fast forward 10 years, and the buzz of potential for new types of B-to-B solutions companies can once again be heard.  So what is different this time around?  What kind of companies will emerge during ASP v2.0?  Questions answered after the jump.

Part of the answer is time – ASPs and related ideas didn’t stop – well, some did – but others just hunkered down and lived a subsitance existance.  But more important to the current trend than these companies were new companies that emerged out of the needs and opportunities created by the consumer internet.  Take content management systems – known to most laypeople as blogs – technologies to serve stable consumer internet markets – such as Aunt Betty’s need to write about the wonder of breeding cats for show – paved the way for the current resurgence.Initially these simple and feature-poor technologes that were targeted at making blogging – or content management – idiot proof for Aunt Betty were co-opted by small business people.  It turns out business people are idiots too. I joke, but its true – at least when it comes to stuff like this.  This ability to “self-serve” these technologies allowed smaller businesses to operate like bigger businesses – or at least have access to things that in the past were restricted to large enterprise.Before long more features were added and this service option began to appeal to larger mid-sized businesses or operating groups of large businesses.  Even in certain cases large businesses themselves.  This is where we find ourselves today – with enterprises re-engaged in ASP concepts – which opens up the world to service options that don’t exist yet because they solve specifc B-to-B problems.There is one notable – and very, very important – exception to this trend I discuss above.  Salesforce.com.  SFDC emerged to serve the SMB market (initially) – not the individual market.  To a degree it followed the path that I laid out above – less featured solution for less sophisticated users – but as the most important “ASP” to date its important to note it’s unique origins for two reasons.

1. It emerged in a unique segment.  Because it solved a simple, large, generic AND quantifiable business problem (it directly served the sales process in a measurable way) AND could be self-administered (at a basic level at the least) it was able to grow while many other ASP ideas that either are more targeted at the cost side of the ledger, are less generic in their application, or more complex in their deployment or utilization stalled.

2. In its emergence, SFDC showed a path to how operationally this shared infrastructure market is a.) fundementally different than just dropping traditional enterprise software into a “cloud” – an important consideration when nearly every software solution is now positioned as having a SAAS version.  b.) this difference at a technological level enables a true ASP/Cloud Computing/SAAS certain advantages and capabilities – both at an aplication level and operationally – with which a repurposed enterprise solution cannot compete.  Ben Horowitz at Andreessen Horowitz wrote an excellent post detailing why this is so.

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