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ASPs Play Host to Biz Applications

11/07/1999 7:00 PM Eastern

Denver -- The future of broadband communications was on
display here last week at a gathering of service providers that are rapidly reshaping the
Internet business model through the use of high-speed networks in the business sector.

Known as "applications-service providers," these
entities are taking advantage of the new networking functionalities made possible by
broadband to offer business customers a broad array of applications managed by
sophisticated software from remote locations.

The applications include basic office suites, electronic
commerce, vertical market-specific tasks and enterprise processes such as accounting,
human resources, messaging, customer-relationship management and supply-chain operations.

"The term 'ASP' scarcely existed six months ago,"
said Scott Bayless, CEO of software company Cyrus InterSoft Inc. "Now the field is
crowded with players racing to get their companies up and running."

Six months is about how long the ASP Industry Consortium
has been in existence, and it now has more than 200 member companies, said Traver
Gruen-Kennedy, chairman of the group, which is based in Wakefield, Mass. "The
continued rapid growth of the consortium demonstrates that this industry is one of the
hottest in the technology sector," he said.

ASPs' importance rests on the fact that broadband networks
make it possible to supply many core-operation-support systems at lower costs than
end-users would pay if they "owned" the application themselves.

For example, at the low end of the applications-cost
spectrum, Interpath Communications Inc. estimated that the "per-seat" (desktop)
cost of owning e-mail on an ongoing cost-administration basis is $15 to $40 per month,
versus Interpath's $8 charge.

At the high end, Forrester Research Inc. estimated that
Fortune 1000 companies spend $8.87 million on start-up costs alone for specialized
business applications supporting 1,000 users. Combined with about $6.7 million in annual
ongoing management costs, that translates into $15,570 per user in the first year to
launch a new application, and $6,700 per year thereafter.

What's worse, such applications have a typical shelf life
of three years at the most.

ASPs are taking advantage of the quality-of-service
controls and high-speed transport made possible by broadband networks to give corporate
customers access to applications at performance levels similar to ones that reside in the
corporate network. This saves companies money and gives small and midsized businesses
access to applications they couldn't otherwise afford.

The ASP model applies to virtually any type of operation,
including mass-market content provision. For example, Cyrus spokeswoman Susan Donahue said
her company is working with a number of online gaming companies that in effect are ASPs
when it comes to hosting arcade applications for the mass market.

"Game companies can use our end-user interface
software the same way any ASP would in serving the enterprise market," Donahue said.
"We're highly focused on educating portal providers and consumer-oriented ASPs about
how easy it is to add Java applications to their portfolios with the type of access
software we provide."

That software, known as "Speiros," gives users
instant access to applications stored anywhere on the Internet from any Net-connected
computing device, using streaming technology that allows programs to operate even before
they are fully downloaded, Donahue explained. "As long as the app is written in Java,
you can deliver it to a user running Speiros," she said.

While the growing availability of broadband connections to
offices gives ASPs a solid foundation, the architectural environment remains extremely
chaotic at this early stage of broadband evolution.

According to Doug Ehrenreich, director of industry
marketing at ObjectSwitch Corp., a provider of core integration software that helps ASPs
to synchronize their operations: "Over the next few months, you're going to see the
industry resolve a lot of the incompatibilities that are slowing things down."

When ASPs choose a particular proprietary core development
tool to work with, that software "case" tool defines the way they interact with
the transactional and networking domains on an ongoing basis, making it hard for them to
exploit new ways of coordinating operations across those domains, Ehrenreich said.
"The goal is to get free of dependency on the case tool," he added.

The "Unified Modeling Language" now under
development by the Object Management Group, an alliance of software companies, could help.
If that language is standardized, it could allow ASPs to leverage applications without
having to rely on tight coupling of the interfaces used in the underlying development
software with the interfaces of legacy infrastructure systems, Ehrenreich said.

Broadband infrastructure combined with sophisticated
operations software can make it possible for companies to use hosted software applications
to handle everything from billing to inventory management. That can be a boon or a threat
to network operators, depending on how they approach the ASP market, said Louise Turner,
director of business development for Abatis Systems Corp., an integrator serving the ASP
market.

Network operators that support the ASP business model will
be far better positioned to capture the traffic of content and service providers trying to
reach the mass market, she said.

"Network-service providers are the distributors in
this new economic model, with ASPs playing the role of wholesalers that warehouse
applications and portals playing the role of the retailer," she said.

Under that model, closing the network off from outside
service providers -- now known as "ISPs," or Internet-service providers -- also
shuts off the natural role of the network as distributor in this new broadband economy,
forcing wholesalers and their customers to look elsewhere for distribution services.

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