ASPs baffled by channel partnerships

Application Service Providers (ASPs) are struggling to master the complexities of the software rental model and are failing to consider all their channel sales options.

Application Service Providers (ASPs) are struggling to master the complexities of the software rental model and are failing to consider all their channel sales options.

An IDC study has found that despite the publicity surrounding the early adopters, this is not a guarantee of long-term success.

Meredith McCarty Whalen, manager of Internet and ASP research programmes at IDC, said: "Brand equity alone will not be enough to enable today's leaders to become tomorrow's mainstays."

The research profiled 23 firms that are offering application hosting services, including BrightStar Technology, EDS, IBM Global Services and Oracle Business Online. It found that ASPs face a number of major challenges, especially when it comes to partnerships.

Although ASPs rely heavily on partners, either for the applications or for the network infrastructure, the research showed that many are still struggling to decide who to partner. Similarly, the report claimed ASPs are not using all of their channel options, even though partners play a crucial role in the sales process.

ASPs also face challenges when expanding their operations with global consistency.

McCarty Whalen added: "ASPs are learning about the limited nature of partnering, the complexities of operations and the importance of scalability. How well an ASP learns these will be a key determinant to its future success."

The IDC report follows hot on the heels of research which suggested that demand for ASPs is growing among corporate decision makers.

A study from research group Ovum claimed that IT directors are keen to embrace the ASP model. This was contrary to IDC's expectations, as it was thought IT directors would block the idea as it would devalue their role.

Katy Ring, senior analyst at Ovum, said: "Today's IT directors are overburdened with work, so if they can delegate responsibility to a supplier, they can concentrate on delivering the critical projects."

Ring said the ASP model had profound implications for IT suppliers, as the software industry becomes more service-led.

"Software vendors may need to become e-service providers, and existing service companies and VARs will need to move into e-services," Ring added.