ASPs Open New E-Commerce Opportunities

New high speed Internet access services like DSL and cable modems are opening the door to a new vision of computing. Many software companies are looking to develop new e-commerce-based sales channels by putting their programs on a Web site and only charging customers to use them rather than selling them outright

Furthermore, instead of charging a high one-time price to license the software on a permanent basis, these software companies are thinking of returning to the “timesharing model” of the 1970s and 1980s, in which users access the application via telecommunications and pay a small fee each time they use the software.

Since timesharing is considered old-fashioned, however, companies have created a new buzz word — application service providers (ASPs) — to describe this return to olden days.

IBM Tries Internet Appliance with Telcos

In what can only be described as deja vu, IBM Corp. and two giant telephone companies — Bell Atlantic Corp. and SBC Communications Inc. plan to test the viability of using an “Internet appliance.” The new device will consist only of a 10-inch color monitor, a computer keyboard and browser software, to access Web-based applications at high speed Internet access.

Bell Atlantic and SBC Communications are two of the largest regional telephone companies in the United States. Bell Atlantic has installed nearly 44 million telephone access lines and about 12 million wireless customers worldwide, while SBC has 90.4 million telephone lines and 11.2 million wireless customers in the United States.

In IBM’s heyday, it used “dumb” terminals that operated over slow-speed, multi-drop leased telecommunication circuits to access giant IBM mainframes that hosted and ran the applications.

In the trial being set up by IBM, two companies will offer ASP services to its Internet appliance users. LaserLink.net will provide Internet access, fulfillment, customer service and technical support for test customers, while Planet Computer will offer executive recruiting services.

IBM said it would target the insurance, finance, healthcare, travel and entertainment industries, which not coincidentally were IBM’s largest users from the timesharing days.

Strong Prospects for ASP Model

The ASP model is a variation of the “thin computing” model pushed by Oracle Corp. a few years ago, in which software would be downloaded to stripped down PCs designed to operate with control from central servers.

The thin computing model failed miserably several years back. Many analysts also think that IBM’s trial of an Internet appliance may also fail, because users will likely need some PC computing capabilities.

These same analysts, however, often see a large potential for selling software applications via e-commerce using an ASP model, especially for products that are used relatively infrequently.

Bell Atlantic Consumer Services Group President Fred D’Alessio goes so far as to predict, “Customized Internet applications, tailored to the information and data processing needs of users, are the next wave in electronic commerce.”

One of the early movers in the ASP field, for example, is Intuit Corp., which put its TurboTax tax preparation software online this year as an ASP service called TurboTax Web.

Users now have a choice. They can use the regular version of TurboTax on their PCs or use the Web application. Since they only need the application once a year, TurboTax is viewed as an ideal example of how the ASP model can turn what would have been a software sale into e-commerce revenues.

ASP Model Works Well in Procurement

Another company that has strong ASP propects is Vsource, Inc., which has cut a deal with giant telco US West to allow small and midsize business customers to handle their procurement using only a browser and access to the application that runs on Vsource servers.

The ASP model makes sense in this case because it can be combined with an online business-to-business (B2B) marketplace that allows companies to kill two birds with one stone. At the same time they use the B2B marketplace to get better prices for items they purchase, they can use the ASP-based procurement application to streamline processing costs associated with that purchasing.

US West is not planning an ASP trial. It is partnering with Vsource to roll the service out to its small and midsize business customers later this year.

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