Applications On Hire

Boon Or Threat? Satyam Computers Services and Computer Associates recently announced a three million-dollar joint venture to provide applications and solutions to small and medium enterprises. BconnectB, an Aptech subsidiary, aims to provide application services to the manufacturing segment. Eastern Software System, Delhi, rents out an application called Makess on the Net charging Rs 9,000 monthly. The global ASP market is slated to touch $ 5.1 billion by 2001. Is India ready for the ASP outburst? How will the channel survive the Net economy?

Sabeer Bhatia, the creator of Hotmail, is probably the first person to have given birth to the now popular concept of Application Service Providers (ASP). The buzzword might not have been coined by then, but Hotmail was the first to provide web-enabled applications. It not only revolutionized the way messages were sent and received by a large number of users but it also meant no more buying of costly applications, no more paying up-front, and no more headaches of installing and upgrading applications.

If that was the beginning, today, every big-time vendor, including IBM, HP, Citrix, Intel and Oracle have come to realize the huge potential of this emerging market. Presently, if a company isn't an "e"-something, then it probably claims to be an ASP or announces an ASP strategy!

The leading ASPs in the country, DSQWorld, ESS and ASP India Pvt Ltd who have taken a march over others, are already touting committed clientele. But before we get into the market scenario, it is important to understand the term ASP because it is being used very loosely these days.

In layman's terms, an ASP provides a packaged application on standard terms to an organization, usually over the Web, on rental basis. Instead of an organization creating the infrastructure for hosting and running a software application, the service is hosted, maintained and run by service providers who are called

ASPs.

The ASP business uses centralized computer services to 'rent' software to clients. The ASP hosts software applications at its data or server farm and in return for a service fee, allows users to run these applications remotely. The results of the applications can be downloaded to the client's site whereas the applications themselves run only on ASP's servers.

There are two aspects involved in this business. One, the nature of the application that can be run through the ASP mechanism, and second, the mechanism of providing the application to end-user.

As far as the nature of application is concerned, it could be any application. For example, it could be Microsoft Word or Spreadsheet. Or it could be as complex as providing Enterprise Resource Planning (ERP) application or an engineering-related application. Instead of buying the package at retail outlet or downloading the code from the Net, one simply logs on to the ASP, and accesses the software.

According to ASP Industry Consortium, an independent international advocacy group that is chaired by Citrix, an ASP is defined as, "One which manages and delivers application capabilities to multiple entities from a data center across a wide area network."

According to Koteshwara Rao, Head, ASP Portal, BconnectB, the ASP value chain includes independent software vendors (ISVs), pure play ASPs, ISPs and systems integrators (SI). While ISVs develop applications and enhance the same, pure play ASPs take responsibility for managing and delivering applications. On other hand, ISPs provide Net infrastructure and connectivity and SIs provide systems integration services wherever required. "There are different players in the ASP space and they would have different origins and core competencies," adds

Rao.

The ASPs have created such a ripple in the market, that corporates are keen to rent software. "New applications can be turned on as conveniently as call forwarding and call waiting with caller ID services," says Anil Menon, Director, Marketing, Citrix Systems India. Thus, existing organizations can roll out applications far faster, reduce Total Cost of Ownership (TCO) and also Total Cost of Application Ownership (TCAO) and improve time to market with the ASP model. Version changes, updates, bugs are all ASP's responsibility and are aimed at removing IS department's nightmares among

corporates.

Sanjay Agarwala, Director, ESS, agrees that ASPs do reduce the cost of entry barriers for usage of an application and, therefore, it is possible for a larger user set to start accessing applications.According to S Gopala Krishnan, Country Head, Dusk Valley Technologies, the phenomenon of ASP will definitely change the way software applications are being utilized and have been utilized so far. The phenomenon would thrive on the principle of how much service an ASP can give. "Till the time ASPs get adopted fully, there's going to be something on the Web, something on the LAN and then people would be talking of real integration and seamless integration. This is how the ASP model is emerging and I see no reason why it should not become huge in India as well," points out

Gopala.

Koteshwara believes that ASPs provide a lot of benefits to companies particularly when it comes to making large investments on applications and fight against obsolescence. "We believe that India is best suited for the ASP model," says

Koteshwara.

Factors hampering ASP growth

No one doubts the fact that there is market for ASP in India. But the question is: Is the Indian mindset prepared for this development? Will companies easily trust a third party with sensitive data to be stored on its server?

"Well, the battle is still in the mind. People are worried about using a huge facility like corporate ERP on the Net. We are battling the mind, we are not battling the infrastructure," says Sanjay of ESS. He thinks that a lot of SMEs are still absorbing the benefits of improving internal efficiency by actually utilizing applications from the Net. Once these benefits are fully absorbed and the SMEs realize that technology must drive businesses, Sanjay believes that the movement, which is a trickle today, is likely to become much stronger.

According to Anil of Citrix, ASPs have a great future in our country with the only concern being bandwidth availability. He adds, "Otherwise we are today far more IPR conscious and most large organizations at management levels, strictly try to impose this consciousness. This has not been altogether successful because of user level apathy and indiscipline, with the latest screen savers, screen shots and games contributing their bit to viruses and piracy."

Of course, in the ASP model, management can leave policies and practices with the ASP who gives the user, privileges at the data center-end, thus leaving little scope for tampering. The pay-per-use model allows companies to leverage their revenue expenses in situations where capital

expenditures are tough to get sanctioned. "Capital crunch will not stop the adoption of latest applications and technologies," says Anil.

Bandwidth concerns>>>>

Bandwidth concerns

In a scenario where it is difficult to even download a Word file, how could one think of downloading an entire application? "You have struck the nail on the head," says Anil. "That is exactly the problem. 'Download and open' or 'download and execute' model will always exercise the network and choke bandwidth. That is clearly not the natural order as we see today with generic popular products like telephone, water supply or electricity. In all these models, the complexity is never at the user end."

He cites a typical scenario, "Imagine a world if we had to wait for the telephone to boot, download applications and execute. Telephone is extremely simple, always constant, with its dial tone." Sanjay, however, doesn't find bandwidth a major issue. "Today people have leased lines and virtual private networks. Investments required for creating the whole infrastructure is rather low and so people are hugely attracted to ASP," he adds.

Gopala sees a different problem, "Suppose I say that all ERP applications are available on the Net, tell me how many companies would opt for these?" Some other questions that need answers include: What is going to happen to a customer's past? Who is going to take care of implementation issues? Once an application is put up, how does a client migrate?

These are very relevant questions and there are no easy answers. Thus, adoption of ASP in India will take some time. Says Gopala, "Metamorphosis from internal system-driven to ASP system-driven is a key issue" that needs to be taken care of among

corporates.

When software solutions can be hosted on the Net, who needs channel partners? "No, this is not the case," says Sanjay of ESS, "ASP in no way encroaches channel partner's territory." The ASPs enable partners by giving them constant support. The channel that was used for selling client servers as a standalone application, has to sell the application off the Net also.

In fact, all the 13-14 sales that ESS has made so far, have come from partners. This has provided partners a continuous revenue stream, which every businessman looks for. Some of ESS sales, which were stuck, got sold once the ASP model came into existence. Since the sales values have come down, customers' hesitation to move to new application areas is much lesser and hence, sales are also easier to make.

Similar is the experience of Anil at Citrix Systems. Anil thinks that traditional businesses have a huge chance to succeed in the ASP business. They already know the industry, they have loyal channels and customers. They will try to innovate and deliver services through more channels. This is what entrepreneurs usually do -- try and channelize their products through various ways.

In the ASP model, even organizations with resource constraints can deliver positive user experience by focussing on its core competencies and supporting select set of users better. Innovation, speed, reach, predictability and focus will continue to be as important in delivering products and services in the ASP economy as they were during traditional times.

Says Rajesh Bakshi, MD, NetLink Ranve Infotech Ltd, "The delivery mechanism of any kind of a business would remain the same and value-added resellers will always be in business." He is of the opinion that the Web cannot come and install a machine. Brick and mortar along with people who can maintain logistics will always be needed.

What are the chances of enterprising channel partners becoming ASPs? Leslie J Lean, MD, Ansata Computer Systems, Bangalore, finds very little scope. According to him ASP is no opportunity for channel partners because it is big-money business. "Channel partners can hardly afford the kind of heavy investments that are required to be sunk in to set up the required infrastructure to become ASPs. Even though Internet is the hub for ASPs, they have to have their own IT and communications set up which is capital-intensive." According to Anil, channels will continue exactly the way they have done so far. They have to continuously innovate, find new avenues of growth, be focussed and deliver to the users and look for positive experience. Citrix, for example, allows its CSNs to become integrators for ASPs and provide various services like hardware delivery, data center integration, developing security auditing, policies, network integration etc.

A Zero value-add box mover will definitely gets squeezed in the value chain, as ASPs try to optimize on delivery, cut time to market and cut product costs. The message is that channels have to move up the value chain. They cannot restrict themselves to being box movers but deliver more services to ASPs. They can develop vertical expertise, develop domain knowledge, learn implementation skills for applications and align with complementary vendors. The name of the game is partnering and consortiums and channels have to be part of that delivering their core values.