ASPs Have Their Own Top 10 List
David Letterman popularized the Top 10 list. Now the ASP world is mature enough to have its own.
IDC, the Framingham, Massachusetts global market advisory firm, decided to compile this list, which ranks the ASP providers by revenue in calendar 2000. This is the first time IDC has prepared this list ranking the burgeoning ASP market. "ASPs have finally reached a maturity level with meaningful revenues," explains Meredith Whalen, vice president, ASP and Internet services for IDC. IDC analysts attempted to put together this list last year but the revenue numbers were too insignificant to be relevant.
USinternetworking Inc. (USi), an Internet-managed application provider in Annapolis, Maryland, earned the top slot with $100 million in revenue. Number 10 was EDS, the Plano, Texas Tier 1 outsourcing provider that now offers applications through the ASP model. EDS had $25 million in revenue last year.
USi was one of the nation's first ASPs, Whalen points out. "The company aggressively worked to build its brand. Now that marketing is paying off," she says.
At this stage of the market growth, size does matter. Whalen reports 45 percent of the $996 million spent last year went to the top 10 ASPs. But you didn't have to be big to be a player. "To get into the top 10, you only had to have $25 million in revenue. That's not a lot. It's clear the ASP market is still emerging," she notes.
Growing to $24 Billion
The revenue numbers, however, are promising. Last year IDC predicted the global revenue would only be $700 million in 2000. The market exceeded forecasts by $296 million. IDC now predicts the ASP market will grow to $24.1 billion by 2005.
The list did nothing to settle the horizontal/vertical debate. USi is a horizontal ASP, offering a host of applications that apply to multiple industries. But No. 2 on the list, TriZetto Group, is a vertical ASP. The Newport Beach, California ASP, which had annual revenue of $54 million, focuses solely on the health care industry. "The jury is still out on this question. But it's clear vertical ASPs do have merit," says Whalen.
The TriZetto Group tied with the Oracle Corp. for the No. 2 slot. The Redwood City, California company, a leading supplier of information management software, is the world's second largest independent software company after you-know-who. It has added the ASP model to its distribution mix.
Software developers are the newest entrants to the ASP business, Whalen observes. Adding an ASP option is one way for software developers to differentiate themselves in the market, she explains. "We'll see more of that," she predicts.
But the next generation of ASP providers will be software companies that write programs to be delivered on the Web. Instead of freezing the code at a certain point in its development so the company can ship it as a new release, this new breed will continuously upgrade its software. "These companies are important to watch," she says.
Common Characteristics for Success
Every ASP on the list was an early mover, Whalen reports. "They have been instrumental in educating and evangelizing the virtues of ASPs. They learned how to optimize their business model," she explains.
The leading ASPs were super at sales. "They were good at signing up and retaining customers," Whalen notes. These ASPs were able to sign up a customer for one application and then expand the contract to other applications.
Most of the winning ASPs offer enterprise ASP services including Enterprise Resource Planning (ERP), Customer Resource Management (CRM), and eCommerce.
The analyst predicts next year's list will have some new names. "This top 10 is in flux," she says. She also predicts market consolidation will continue through mergers, acquisitions or ASPS simply going out of business. "This is a natural market evolution," she believes.
Lessons from the Outsourcing Primer:
- The top 10 ASPs captured 45 percent of the $996 million market in 2000.
- Both horizontal and vertical ASPs did well and made the list. The list indicates both models work.
- Traditional software developers like Oracle, which tied for No. 2, are adding ASP options. But a new breed of developer is writing software for the Web that can be updated continuously.
- IDC predicts the ASP market will remain in flux. Market consolidation will continue.