I've been seeing a recurring theme in my reader mail: I have a company in such-and-such an industry; how do I find an application service provider (ASP)? This question is a good one, but there doesn't seem to be a simple answer. The problem is that many ASPs are smaller, newer companies. When you start a business, you can focus on building branding with advertising, or you can focus on building your product. Both are vital, but whatever investment you devote to one task, you divert from the other. Wisely, many ASPs spend more time developing a good solid product than selling vaporware, but sometimes it's hard for customers to find the right ASP because they don't hear about it.
This situation is frustrating for both sides. At this point, the logical customers for ASPs are mostly small- and mid-sized businesses—companies with few or no dedicated IT resources. Target marketing to the Fortune 100 is one thing; target marketing to many small businesses is another. If customers and vendors can't find each other, will the ASP model survive its growing pains? The story of Positively-You, described last week in the Wall Street Journal, New York Times, and Salon Magazine, makes one point clear: You don't survive as an Internet-based business without customers, and it's hard to get customers without advertising.
I'm hoping that a couple of trends will simplify the process of matching ASPs with customers. First, based on what I gleaned from a discussion at the ASP Summit in February, I bet that during the next year or two, we'll see more virtual application suites composed of vertical applications from various vendors available from one site. The idea is that you sign on to a portal to get your online applications. The applications might come from various providers, but, to the customer, this setup is transparent. The result will be fewer apparent providers, but just as many applications—and a simpler choice for consumers. This approach isn't just theory; check out Pick Systems for an example of how a portal system can work.
Second, I think ASPs will find it easier to reach potential customers by advertising in trade journals—or anything else written for potential customers—than by advertising in computer magazines. The ASP solution works best for companies that need a capability, not a particular application. People looking for capabilities for their companies don't read computer magazines unless they're computer people; they read the trade journals for their industry.
In the ASP market, the killer app isn't a piece of software; it's a service, whether that service is application pushing, network security, or comprehensive Help desk services.
On a related note, I've been talking with a lot of ASPs and related companies and learning about individual players and offerings. Starting with this issue, once a month I'll write a short profile of an ASP whose ideas or model I found interesting. (Please note that I'm neither advertising nor endorsing the companies I describe. I'll choose companies and services that I think point to important ways that the marketplace is developing, but I'm making no guarantees.) If you'd like more information about a particular company, drop me an email with the name of the company in the subject header. If I get many requests to cover a specific company, I'll try to write about it.