Application Service Providers

A Primer

April 2000

What is an “ASP”?

An application service provider is a company that creates a subscription based software service. For a periodic fee (usually monthly or yearly) the ASP provides software (which is referred to as the generic term “content”) and other computer based services to users over the Internet or other network mechanism.

There are many people who believe that with the advent of the Internet, it makes sense to provide software as a service rather than as a “product in a box”. Users simply would pay a fixed monthly or yearly fee in exchange for always having the use of the latest/greatest software technologies.

Examples of what an ASP might do

Here are a few obvious examples of what a fledgling ASP might try to do.

Backup Service Provider. For a small monthly fee, you can back up the contents of your hard drive to a secure remote server. In the event of a catastrophic crash, you can safely access all your critical data that has been stored remotely by the service provider.

Distributed or shared files provider. For a small monthly fee, users will be able to add a “web drive” to their list of storage devices (i.e. presently you might have an A:, C: and D: drives, think of having a W: drive where that drive is actually somewhere on the Internet). Users can put data and programs there that they want to be able to access from any computer that has an Internet connection.

Office application provider. For a small monthly fee, a user gains access to a set of office applications (word processing, spread sheets, etc.). Microsoft has already announced their intention to do this with future versions of Microsoft Office.

Financial application provider. Imagine a scenario where you pay $2.99 per month for access to Quicken-net in which you get Quicken plus all their on-line financial services.

Entertainment provider. For a monthly fee, a user gets access to cool new interactive entertainment.

Desktop extension software. The latest advances in under the cover software technologies provided to users as they are created.

Why are ASPs getting so much attention right now?

The moment internet connections started to become fast enough that dealing with data and programs over the Internet was no longer painfully slow, a whole new world of opportunities arose.

It has been long known that most people use the software that comes with their computer and little else. Home users might buy a few applications and games but generally speaking, they use what came pre-loaded. This is because people are generally not comfortable going out, selecting software, purchasing it, and installing it. ASPs have an opportunity to create a new market based on the user’s preferences of letting someone else handle the installation, maintenance and selection of software.

Moreover, it represents a steady and renewable revenue resource. A monthly $3.99 charge seems very little to a user but adds up to nearly $50 per year and based on AOL’s statistics, the average user can be expected to subscribe for between 4 to 5 years. It’s a great solution for the user as well as a great new revenue stream for software companies.

ASPs in the real world: A reality check

One thing that is very clear is that there is no clear cut definition of an ASP yet. There are so many different models and so many different concepts of how people will use computers.

On one hand you have Larry Elison of Oracle who believes strongly in the Network Computer. In his vision, users connect to powerful centralized servers via high speed connections where the software is provided and maintained. Larry Elison’s visions of the future have been right many times which explains why he’s worth billions of dollars. His camp could be called the “thin client” camp. Oracle isn’t alone, IBM is also moving strongly in this direction.

At the other extreme you have Microsoft who believes that people will stick with PC’s and run most of their applications locally with some bits of data being handled remotely. Though, Microsoft is hedging their bets (so is Oracle) and is making a version of MS Office 2000 that will run over the Internet from a remote host.

In between these two visions are literally hundreds of start-ups around the world hoping that their vision of the future is the one that will come to be.

One of the few things that most analysts agree on is that “rentable” software and services are the “wave of the future”. Unfortunately, most ASPs are currently only talking about how great their service will one day be but have not yet actually shown anything. But a few are starting to show some promise:

WebOS: Entire operating environment that is completely executed remotely and displayed locally. Just need an internet ready PC.

WebOS (http://www.webos.com) has some impressive potential. A user with an internet connection and a browser can run a pseudo-OS on a remote machine. Their applications and data all reside remotely. While it makes a good screenshot, it is currently in its early stages with performance not quite ready for general use. But it gives a good preview of a future with web based terminals for accessing email,

contacts, and other critical data in a virtual OS.

JustOn (http://www.juston.com)

A little less extravagant is JustOn which provides virtual drive space that can be access from any browser. Store your files here. The subscription cost is currently free.

McCaffey VirusScan (http://clinic.mcaffey.com)

One of the most practical services already available in this new form is virus scanning. Depending on the provider, it may be free or a nominal monthly fee may be required. In return, your system will always be virus free and the latest in virus scanning technology will always be available to the user.

From a remote website, VirusScan scans my system.

WebTurboTax (http://www.turbotax.com/webturbotax/welcome.html)

Another truly practical market segment for ASPs to go into is tax preparation. Why go to the store each year and buy a piece of software to do your taxes when you can simply pay a $9.95 per year fee to Intuit in exchange to having access to their tax preparation software?

Arepa.com (http://www.arepa.com)

Arepa.com is in the process of launching PlayNow, an edutainment on demand subscription service targeting Broadband customers (people with very fast internet connections).

For a set price per month, users will be able to play different games each month. That games are downloaded on demand over a high speed connection to be played. While good in concept, the Internet’s current performance issues are a barrier to entry. However, Arepa has made headway into making bundling deals with large ISPs who can locally host the content and thus send it to their customers in real-time at much higher speeds without all the problems of the Internet.

Stardock.net (http://www.stardock.net)

Stardock.net is arguably the first ASP on the scene with a working service and original content to back it up. Its first product/service is called Object Desktop, it blends the line between the traditional software package and a thin client. For $49.95, users get Object Desktop which comes with the Object Desktop Network, an on-line subscription network that provides updates and new features to Object Desktop for an entire year. At the end of the year, users can continue subscribing for an additional $34.95 per year (around $2.99 per month).

Object Desktop blurs the line between thin and fat client. Programs stored remotely but executed locally.

The Object Desktop Network works similarly to PlayNow except that once the user has downloaded a component, it remains on that user’s machine until they choose to delete it thus decreasing bandwidth considerations. Stardock’s taken the middle road between thin and fat client, user data and application storage is handled remotely but installed programs and execution is handled locally.

Object Desktop itself is a set of desktop enhancements and extenders that make the PC easier to use while making it far more customizable for experienced users.

The Future

The ASP craze has come rather suddenly. The opportunities that this new market represents are staggering. While shrink-wrapped retail software will continue to be a growth market for the foreseeable future, users who are unable or unwilling to continually upgrade their software themselves or want to deal with the administration or maintenance of their software will increasingly turn to ASPs to provide high quality software that will take advantage of the latest improvements in technology for a reasonable cost.

Useful resources:

Renting: The future of software?

About Stardock.net

Stardock.net is the name of the Application Service Provider created by Stardock Corporation. It has created and delivers two services: The Object Desktop Network (ObjectDesktop.net) and The Drengin Network (Drengin.net). Object Desktop has been created to deliver desktop extensions to users who are looking to increase the ease of use and power of their PC desktop. Drengin provides episodic games as well as AAA game titles created for specific audiences. Stardock.net’s software is in use by over 3 million users. Visit http://www.stardock.net to learn more about them.