The ASPs

Value Proposition or Valueless Preposition?

Paul Greenberg

President, The 56 Group, LLC

Author: CRM at the Speed of Light, 2nd Edition (McGraw-Hill 2002)

3rd Edition, May 2004

14%

69%

10%7%

1 2 3 4

What is an ASP?

1. A snake.

2. Software provider.

3. A utility company.

4. Who the heck knows?

What is an ASP?

Application Service Provider (ASP)

• More than one Variety Net Natives a.k.a On Demand Utility

Hosted Solutions

Other Permutations

• Hybrids

• Both: Online/On Premise

ASP: The Rise & Fall

The hosted solution model failed miserably in 2001 after a brief, meteoric rise• Fears about data security – some real, some

imagined

• Hosted software, not a services model

• Cost was still too high – paying for licenses and administrative fees and consulting

• Lousy marketing strategy – spent lots of money before delivering anything real at all

ASP: The Fall & Rise

New business model intersected bad economy

• Money was an object to most companies

• CRM was still on the table

Traditional CRM had hit a brick wall with its “large enterprise” problems and slow ROI

Net Natives able to swoop in with great marketing and smart value proposition

ASP: The Model

Software As Subscription

• Service oriented, multi-tenant architecture

• Regularized, flexible fee structure (monthly,

annual)

CFOs love this approach – low risk, amortized

cost, little bit upfront

ASP: The Model

On Demand Services need SOA• Service-Oriented Architecture (SOA)

Collection of business components and IT functions driven by evolving business reqs

Web services (XML, SOAP, WDSL, etc.)

• .NET or J2EE compliant platforms Vendors vary (Netsuite J2EE; Salesnet .NET)

ASP: The Value Proposition

The Upside - CFO

• Much lower TCO than traditional vendors

Approximately 20% of traditional

• Pricing model is subscription fees

Per user per month

Can be flexible

Easy to plan for

• Cost overruns not an issue

ASP: The Value Proposition

The Upside – CIO/CTO• No downtime during upgrades

• IT personnel overhead outsourced to ASP – significant reduction of administration time

• Much shorter deployment times 30 days is not at all unusual Compare to 4 to 18 months for traditional CRM

• Customization is now configuration, though custom applications can be built w/provided tools

ASP: The Value Proposition

The Upside – VP of Sales (or Marketing)

• Salespeople able to work offline,

online or mobile – always up to date

• Adoption rates high due to easy to use

interfaces

ASP: The Value Proposition

The Downside

• ASP claims are often excessive While benefits great, just not as great

ASP: The Value Proposition

The Downside

• Don’t provide strategic services Change management

Value creation services

Other performance related benefits

Are a system and a technology, not a

strategy and a philosophy – missing those

pieces

ASP: The Value Proposition

The Downside

• Competitive beyond Reason Always sending out press releases on which

client they’ve stolen from whom

Some will make unfounded claims about

their competitors that under scrutiny aren’t

true

ASP: The Myths

Security Myth

• “My data is not secure, because I don’t have it”

Mythbuster

• ASPs have multiple levels of security Physical

Internet

Network

Operating System

Application Level

ASP: The Myths

Integration Myth

• “Its impossible to integrate because the

hosted services don’t integrate well with our

on-premise systems”

Mythbuster

• Use of web services makes integration less a

chore, though issues will be there APIs, service oriented architectures

ASP: The Myths

Functionality Myth

• “The ASPs might be cool, but they don’t have

anywhere near the functionality we want”

Mythbuster

• The net natives and hosted services provide

all the functionality you need

• Not in all circumstances (manufacturing

environments, etc.)

ASP: The Market

Growing Rapidly – Here to Stay

• Aberdeen - $8.0 billion by 2007 28% CAGR

• IDC – 65% interest in using “on demand utility”

• Gartner Group – “in 2004, there will be increased acceptance of the hosted model for sales automation for all enterprise sizes, with an understanding of its limitations”

ASP: Who are Those Guys?

Salesforce.com

• 8,400 customers, 120,000 users

• One of two vendors providing end-to-end

“value chain” services

• Put “software as services” model on the map On Demand Utility

• Major force in changing CRM paradigm

ASP: ASP: Who are Those Guys?

Netsuite

• Over 7,000 customers

• The other end-to-end value chain provider Even include modest Partner Relationship

Management capabilities – uniquely

• The only net native that is an Oracle-focused alternative

ASP: ASP: Who are Those Guys?

Salesnet

• Easily the deepest sales functionality of all the

net natives

• First net native to understand the process-

driven transformation of CRM

• Uses business analysts to work with you to

configure or customize Salesnet to your needs

ASP: ASP: Who are Those Guys?

RightNow

• Deepest customer service functionality

• 20 straight quarters of profitability

• Unique selective upgrade capability

ASP: ASP: Who are Those Guys?

Siebel CRM OnDemand

• Alliance with IBM OnDemand services

• Aimed at mid-sized companies

• Siebel did a 180° wheelie on hosted market

after initial failure

Siebel CRM OnDemand: Upshot Edition

• Siebel acquired Upshot in 2003

• Aimed at smaller business users within Siebel

world

ASP: The Other Players

Hosted Solutions – Conservative Cousins

• Corio, USInternetworking, Surebridge• Surebridge has best value proposition with

hosted version of MSCRM 1.2

• Represents 40% of their revenue even

though MSCRM out only a year

ASP: Protect Yourself

The Service Level Agreement (SLA)

• Must be tightly binding and detailed

• Consider Scope of services Performance benchmarks Time to problem resolution Security Uptime guarantees Credits for great performance, penalties for poor

performance So much more

THANK YOU

For further information:

Phone: 703-551-2337

Email: paul-greenberg3@comcast.net