Application Hosting:  IBM And A New Look

We have been happily watching the rebirth of the ASP/SP/XSP market.  Several years ago, in our original research on this market, we predicted that most of the first players would fail because they had either failed to start with a viable business model and/or because so many of them were trying to remarket client/server software, ill-suited for the web-based delivery model.

What’s different now? 

1. Along with the bursting of the Internet Bubble, we have gotten away – far away – from the idea of viable companies with no (or nonsensical) business models.  The new companies are offering valuable services, marketing them to targeted customers, and asking to be paid appropriate prices.
    

2. We are seeing a great deal of Net Generation (or next generation) software, purpose-built for the Web, coming into the market - designed for access via a browser interface and, more to the point, intended to let users provision and administer themselves, as much as possible.  This is critical if SPs are to make money.  Moreover, this software typically offers its limited customization through customer dialogues – no administrator intervention or programming required.

IBM Application Hosting

Various myths of the original ASP model are being set aside.  For example, it was widely believed that this form of access to software function would appeal largely to smaller firms.  IBM’s newly announced Applications Hosting is aimed right at the large enterprise.

IBM has expanded its application hosting strategy, adding to Ariba Buyer and WebSphere solutions from Siebel and SAP.  IBM will focus its offerings in three categories, Enterprise Resources (SAP Hosting, Dynamic Workplace – Lotus e-Meetings), Buy and Supply (Ariba Buyer, Ariba Seller, i2 Rightworks), and Sell and Support (Siebel Hosting, WebSphere Hosting, SurfAid).  These hosted applications will be targeted to Large (1,000+) and Midmarket (100 - 999) organizations.

IBM sees this as a way of meeting customer demand for a pay-for-use model, fully supported.  IBM can provide the hosted applications from an IBM Data Center or from an IBM-managed Data Center on the customer’s site.

IBM notes that this is different from the earlier ASP model which was centered primarily on a lower total cost of ownership which was hard to achieve.  It also focused on small to medium sized customers rather than on enterprise accounts, where there is much more potential for revenue and profit.  “These are complete solutions that address high ranking customer needs such as new functionality, guaranteed access to scarce skills, security, network quality of service and superior support,” claims IBM.

IBM believes that, as computing evolves to a utility (as in their e-business on-demand offering), IBM will be able to offer even more complete solutions tailored to specific vertical markets.  In the meantime, it sees its biggest competition for this offering not in other SPs, where IBM’s greater resources and credibility give it an advantage, but rather in In-House IT.  IBM will have to prove that its solution is more flexible and offers significant access to skills and competence, as well as a way to avoid capital expense.

BMC Enables MSPS

In the meantime, a number of other systems vendors, telcos, and systems integrators are considering the SP business.  In this effort, they will be helped by the growing offerings of Systems Management Software from vendors like BMC, designed specifically to assist SPs in assuring that their enterprise IT customers receive the performance and availability they’re paying for.  BMC’s Subscription Services group now has software which can be used by MSPs (Guardian Angel), by customers through BMC’s own ASP offering (Site Angel), or purchased and installed within a large enterprise to help manage their internal Quality of Service for distributed IT (Patrol Express).

We expect many customers, both large and smaller, to use services from various service providers.  The next step, we suspect, is to figure out how to organize these services so that organizations can receive all of their outside services through a single portal without having to provide one for themselves. 

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