Does your ASP partner have a hidden agenda?

Rick Parry, MD of Progress Software South Africa, sets out checkpoints for software developers entering the ASP arena.

With end-user affordability becoming key to the survival of many software brands, large and small software developers the world over are currently weighing up the pros and cons of entering the application service provider (ASP) space. And with IT vendors bringing ASP partnership programmes to market thick and fast, independent software developers are hard pushed not to consider the potential benefits of partnering for profit.

But how can a potential ASP ensure that the vendor does not have a hidden agenda since, quite obviously, the vendor`s motivation in offering the ASP partnership programme is a desire to grow its own future customer base? It`s a fair question since a partnership programme invariably involves licensing and other fees, such as a percentage of user or transaction fees, to be paid to the vendor.

ASPs seeking IT vendor partners should ask themselves the following questions:

• .         Is my IT vendor leveraging its abilities to help me, the software developer, to develop and refine my ASP business plan and strategy?

• .         Is my IT vendor offering to help me address business problems beyond the technical ones associated with adopting the ASP model? For example, is it helping me design an appropriate sales force compensation package?

• .         What is the full extent of my IT vendor`s investment in the ASP programme? Is my IT vendor trying to grow its business with a minimum amount of investment and risk?

• .         What are the central goals of my IT vendor`s ASP programme? To what extent does my IT vendor want to ensure successful delivery of the ASP model to market?

• .         Is my IT vendor genuinely keen for me to enter the market and grow my business with a minimum amount of investment from my side? The answers to all these questions should be positive and constructive. A true partnership programme needs to deliver a broad range of added value to the software developer to fill in the gaps of the software developer`s own set of skills, for example, by offering help with product development, strategic marketing and product testing, or by negotiating with a reputable third-party Internet service provider to host and manage the application.

ASP partnerships between vendors and software developers can ensure rapid delivery to market, but potential ASPs need to guard against a false sense of security and starry-eyed dreams that the vendor will wave a magic wand.

Instead, they need to understand that ASP is very much a model for future business operations in the same way that e-commerce in general, including business-to-business and business-to-consumer, is the way to the future.

The IDC reports the software industry is worth more than $157 billion a year, with a growth rate of 15% a year making it one of the world`s largest and fastest growing industries. So it makes sense to protect your investment in this sector. Also, because software influences another $800 billion of investments in hardware and services, there are plenty of reasons why even non-software IT vendors would want to enter the ASP field with partnership programmes.

In addition, the benefits of ASP for end-users and developers are simply too good to ignore. ASP gives small to medium enterprises access to top-class systems while broadening the software developers` market. It allows end-users to pay for use of the application on a monthly or per use/transaction basis, enabling better financial control for the user and assuring annuity-based revenue for the developer.

An effective ASP programme that yields such benefits is one that ensures a win-win outcome not only for the IT vendor and software developer, but also for the end-users.