Bus. Std: The Return of ASPs

My latest column in Business Standard:

Application Service Providers (ASPs) are set to make a comeback – in an avatar that is also being termed on-demand software or software-as-a-service (SaaS). Business Week wrote recently: “Companies like Salesforce.com, NetSuite, and newly public RightNow Technologies are reinventing the way customers buy software. They're all making basic corporate software to manage finances or a sales team, run a business or run a call center -- not new stuff, and in many cases, with fewer features than existing products. But the innovation is in the business model. These companies deliver software over the Internet –- a Web service, if you will -- and companies pay as they go with monthly fees. That means less costly integration, no hiring an in-house administrator, and no big up-front contracts. It's a considerably cheaper and easier approach that gives these software-as-a-service companies an entrée into the last wide-open sector of software customers: Small and midsize companies.”

KB Chandrasekhar of Jamcracker wrote recently on ASPNews.com about what is different this time around: “Today, with improved on-demand delivery and management solutions, software providers have gained significant efficiencies-of-scale in delivering SaaS, which in turn helps make for some very attractive price points. On the demand side, companies have faced severe economic challenges over the last five years, forcing CIOs to do more with less, and to focus on bringing more discernable value to their companies.”

SMEEMs ((small- and medium-sized enterprises in emerging markets) are the last frontier for technology companies. They have only used IT sparingly so far. They are also the engines of growth for their countries. As emerging markets develop, these enterprises will grow and need to leverage IT and best practices to ensure they are not the weak links in the real-time value chains of the large enterprises. Technology companies seeking growth will do well to look at SMEEMs and use the service model to deliver software to these enterprises.

The opportunity for both SMEEMs and the ASPs is thus significant. This is because of the lack of legacy infrastructure – enterprises have simply not invested adequately in IT over the past decade because of issues like affordability (dollar-denominated pricing), desirability (lack of relevant applications) and manageability (not enough skills to manage technology). Now, with the ASP model, all of this can change. As businesses realise that they have to automate for growth, software vendors have an opportunity to fulfill this market need. A number of factors will enable this shift.

First, there is a growing recognition in the IT companies that the next untapped frontier for growth is in the emerging markets. As these countries develop and build their physical infrastructure, the digital infrastructure and information pipelines also need to be put in place. This is where time needs to be compressed and scale needs to achieved rapidly. Making “business process portals” which cater to the next enterprises is the fastest way to reach out in an environment where the alternate distribution channels are not fully formed.

Second, the growing availability of reliable and affordable broadband connections in emerging markets means that the Internet is now becoming an extension of the local network. People have become comfortable with using the Internet in their lives as consumers. Even in India, broadband connectivity is becoming available across the country through the phone companies and cable operators.

Third, the dramatic growth in mobile phones has shown people the value of instant and always-available connectivity. Mobiles have hastened the pace of business – people can call or SMS each other. In many ways, mobiles are becoming the “computers of the East.” But the mobiles have limitations and need to be complemented by desktop computers along with applications and services. The need for multi-device access will drive the shift from desktop-based and LAN-based computing to centralised computing platforms.

Fourth, in the avatar as consumers, people have already started trusting their data to centralised services. Email service providers like Yahoo and Microsoft’s Hotmail are used by hundreds of millions of users. Various ecommerce providers have our credit card information. ASPs like Salesforce.com have also demonstrated that even businesses are willing to host sensitive customer data on central servers outside the firewall.

Finally, there are a number of technologies like web services and Ajax (Asynchronous Javascript and XML, also called “remote scripting”) which can serve as the foundation to create applications that are modular and integrated at the backend, and have rich user interface not traditionally associated with web-based programs. These may be old technologies, but they are being applied in new and innovative ways by companies who don’t have a legacy to protect and sustain.

By providing the right set of integrated, hosted solutions with a utility-like pricing model, the ASPs can provide three clear benefits to SMEEMs. First, since software is delivered over the Web, there is no need for anything more than a computer connected to the Internet within the enterprise – complemented by the mobile phone. Second, a wide variety of integrated applications can ensure that multiple functions can be automated rapidly. This addresses the desirability issue. Third, monthly payment options allows the SMEEMs to link payments to business outcomes, thus addressing not just the affordability issue but also the ability to measure return on investment (RoI). As Ray Lane puts it in an article on Sandhill.com: “I define software as a service as tying supplier revenue to a business outcome: the supplier sees the client’s end result, measures its success, and receives revenue based on the results achieved.”

For the business, the key benefits are: there is no need to invest in any IT infrastructure, payments are made monthly and can be tied to business outcomes, and it is possible to get an integrated solution which automates key business processes. Software companies – who so far have only limited success in selling software to businesses - need to learn from the Chinese gaming companies: shift to an online model to eliminate piracy and increase reach. Going the ASP route is going to be the only option for ISVs seeking to build a large and profitable business.

I believe that from the perspective of emerging markets, the ASP model of software-as-a-service is a disruptive innovation. The competition, for the most part, is non-consumption, as SMEEMs use only limited software for their business. ASPs can change that. The Age of ASPs and software-as-a-service is upon us.

Loband

A Slashdot reader wonders if loband is the killer app for the developing world: "With recent stories about hardware products for the developing world - namely the MIT Media lab's $100 laptop and the Simputer, its interesting to see a software solution to the problems of internet access. Aidworld, a Cambridge (UK) based organisation specialising in ICTs for the developing world have created a free internet service to speed up web browsing in low bandwidth environments: loband. Using server-side compression and by filtering images, scripts and plugins while retaining content and basic formatting, loband reduces bandwidth requirements by between 5 and 50 times. Its making waves in development circles but it also seems to make for a much leaner browsing experience in this world of heavyweight websites. Could this be a much needed stepping stone for users in developing countries? Do high bandwidth consumers find the sites they view could look much cleaner?"

Grand Challenges in Networks for the Next 15 Years

Slashdot points to a paper by some of the researchers responsible for the Internet, including Bob Branden of ISI and David D Clark from MIT, "who have outlined what they see as the grand challenges for internetworking and computation in the next 10-15 years (PDF). The report from the IRTF's 'End-to-End Research Group' discussed the question, 'How might the computing and communications world be materially different in 10 to 15 years' and how do we get there? From a universal system for location, to small-area networks, to operation in time of crisis, software radio and an agenda to reduce the energy required for communications this document tries to imagine what will be like packet-switching was for the past 15 years."

Top 25 Technological Breakthroughs

CNN has a list of tech advances over the past 25 years:

1) Wireless world
2) Defense technology
3) Alternative fuel vehicles
4) Biotechnology
5) Computers
6) Lasers
7) Genomics
8) Global finance
9) Processors
10) Digital storage
11) Space
12) Fiber optics
13) Satellite TV & radio
14) DNA testing
15) Video games
16) Biometrics
17) Energy and water savers
18) Scanning tunneling microscopes
19) Batteries
20) E-baggage
21) Remote controls
22) Animal cloning
23) Manufacturing technology
24) The big picture
25) Weather technology

It writes:

In 1980, telephones were stuck to walls, facts were found in books and people had to browse shelves in a record store if they wanted to buy the latest music. Now, access to all of that and more is found by just reaching into our pockets.

"For a long time people have thought of information as being a destination," says Scott Shamp, director of the New Media Institute at the University of Georgia.

"You had to go to a book, you had to go to a library, you had to go to a shaman. ... But now, with new mobile technology and wireless technologies, information is turning into a companion."

In the Information Age having immediate access to data is fundamental to progress. In some cases the advances are serving to overhaul industries at a lightning-fast pace.

The Internet allowed tech-savvy music lovers to force changes in the way the music industry does business. Text messaging over cell phones has made written communication more immediate.

Having a computer in almost every home in America was instrumental to this massive technology shift -- ranking No. 5 on the list.

Now, having computer access in homes is not quite enough. We want to use these tools everywhere. Wireless hot spots have popped up in cafes, airports, universities -- even whole city blocks.

Ethernet Everywhere

Om Malik writes:

I got a chance to chat with Bob [Metcalfe], and he said that it is time to stick a fork in SONET and other old school telecom networking technologies, that were more suited to the voice networks of the yore than modern broadband networks. “Its time that we start seeing the Internet infrastructure move over to a new technology because of all these new applications,” says Metcalfe.

“I see Ethernet developing in four directions: UP, DOWN, OVER and ACROSS. UP in speed - whether we jump to 40Gbps or 100Gbps … DOWN to the 8 billion processors shipped each .. OVER wireless links - WiFi, WiMax, ZigBee … ACROSS the telechasm between LANs and WAN.”

Service providers in Asia Pacific and Europe are turning to Ethernet, says Metcalfe. You see newer economies like India and China openly embracing the Ethernet bandwidth gusher. Cisco, for example has sold lot of gear to Tata Indicom Broadband Services, which is going to sell 10-to-100 megabits per second service to businesses in Bombay. Consumers are going to get the same Ethernet service for about $40 a month. Nearly a million customers are going to eventually connect to this network. Eight cities in total will eventually go online over Ethernet. Reliance is also building similar networks and are a big customer of Atrica, incidentally. In US, Cox and SBC are two of the incumbents who have expressed their pleasure with carrier Ethernet.

“Core IP networks and routers have been shrouded in lot of mystery and magic,” says Thompson. “Ethernet is relatively simple and as a result you can have a simpler network. Ethernet… that’s an interesting trend.” Metcalfe couldn’t have said it better.

TECH TALK: Good Books: Better Presentations

I make presentations quite often. Most of these presentations are filled with slide after slide of bullet points. So, it was with great interest that I read Cliff Atkinson’s blog when it first launched. The blog was a collection of fascinating insights in how to improve presentations using PowerPoint (or in my case, OpenOffice Impress). Atkinson has now written a book “Beyond Bullet Points: Using Microsoft PowerPoint to Create Presentations That Inform, Motivate, and Inspire.”

Here is one of Atkinson’s blog posts entitled “Center of Gravity”:

Whenever I look at a PowerPoint presentation for the first time, I go to Slide Sorter view to get the lay of the land: Can I see a clear story across the entire experience? Then I'll shift to Notes Page view: Are the projected visuals and spoken words planned together? And last I'll go to Normal view: Can I easily understand the main idea of this slide?

It's usually the case that the answer is No to all three questions. More often than not, the presentations are very difficult to understand, packed with more text and data than anyone's cognitive ability can process; and little if any narrative structure.

What I commonly find is that any single presentation is actually multiple presentations that are yearning to be liberated. Where we might try to load up the slides to save time by creating a one-size-fits-all presentation, we actually end up with a situation where one-size-confuses-all.

One solution to the problem is the discipline of completing Act I of your story template..When you write the statements that form the headlines of the first five slides, you are making purposeful decisions that will sort, distill and structure information in a way that makes sense to your specific audience.

Franz Dill of IFTF Future Now writes: “Atkinson's approach is very nicely tailored for important, complex presentations. His model is that of telling a story ... storyboard it, use minimal text (no bullets), engage the audience. He picks a board presentation scenario and goes through it in some detail. Very thoughtfully done. I also like the fact that he covers other parts of the process ... how you present the slides, pacing, and how to tailor it for later emailing to people that could not attend, now a very common situation. I have been saving presentations for reference for some time, and am often amazed at how incomprehensible a slideshow can become. In fact the latter situation has often made me use more text and slide detail than I would otherwise.”

Lars Bergstrom adds in a review on Amazon: “I believe that the book's greater contribution is pointing out that most people structure presentations as a dump of data rather than taking into account their audience and the goal of their presentation -- why are people there? What do you want them to do or believe after you're done presenting? Even if you disagree with Cliff's convincing points on removing bullets from your decks, you should take to heart his framework for developing concepts and decks.”

Tomorrow: Better Presentations (continued)

Related Entries:  [All]
TECH TALK: Good Books: Beautiful Evidence and More Than You Know [November 3, 2006]
TECH TALK: Good Books: Winning Decisions [November 2, 2006]
TECH TALK: Good Books: The Go Point (Part 2) [November 1, 2006]
TECH TALK: Good Books: The Go Point [October 31, 2006]
TECH TALK: Good Books: In Spite of the Gods (Part 2) [October 30, 2006]