ASP business model - What do you think?

[swarrier]

Do you think the Application Service Provider model (where you provide software-as-a-service on demand, online) model still a viable business model for small business owners? ASPs used to be the hot "new find" during the dot-com era, but not much any more. I used to believe that the ASP model is valuable.

Technically, the ASP model and the content/affiliate model do not fall in the same tier. The ASP model is more akin to the true e-com model. However, from a stand point of revenue generation, which model makes more sense for a small business owner?

One of my friends is operating a successful ASP business since 2000 and he makes decent money from it. However, the amount of work he had put in to creating and stabilizing it is mind-boggling. Knowing his user base and pricing, I think his returns are OK, but not great. Reading on this forum and some others, I think, his ROI could be better.

Given the fact that if you are creative enough, you can generate multiple revenue streams with conent/affiliate/advertisement sites, do you think it makes more sense to have multiple content/affiliate sites as compared to one ASP site/idea?

[moonshield]

I think it would make more sense to have the multiple content sites. Rule of business... diversification. If certain markets go down you will still have a dog in the fight.

On the otherhand... a good ASP site, you could be bought out by a larger company and make large amounts of cash on the sale.

[Rick]

I think it depends on how good your offering is. ASPs are going to become more and more successful as people gain comfort with the web and bandwidth continues to increase.

[swarrier]

Hardware and bandwidth factors are setting a more favorable environment for ASPs. Many of the regular business desktop software functions can be transformed to hosted services .. but again, it is a paradigm shift for many companies.
Even today, companies are relucant to pay recurring fee for a service as compared to paying a lumpsum for a software.

[brucet]

Broadband is increasing the appeal of ASP , but not to any great extent - and it's starting from a low base. In the UK, for example, less than 10% of ecommerce sites use third party ASP solutions - though in the US I think the figure is a bit higher.

One problem is that we are still a world away from being able to deliver ASP solutions that are anything like as slick and functional as their desktop equivalents. The best ones are only affordable by large corporations. Plus, small businesses hate to be locked into one supplier, and they hate giving away control of their business systems and data.

The one appeal of ASP to the end user is the low startup cost. But because it's a rental model, the long-term costs are higher, so they lose their appeal quite quickly. And because they are limited in functionality, the more successful businesses outgrow them very quickly and upgrade to something else. So from a supplier's point of view, it's a recipe for constantly losing all your best customers.

Bruce Townsend
Actinic Software
www.actinic.com | www.actinic.co.uk

[Cutter]

There is clearly a higher investment requirement and risk of developing an ASP vs creating content sites -- but, if you are successful the payoff is higher. I think you have a higher chance of being able to sell your ASP to another company than you do a content site (but I'm working about that.)