VARs set to ride ASP wave

Systems integrators and VARs are in an excellent position to take advantage of application service provider (ASP) growth, according to Paula Hunter, president of the ASP Industry Consortium.

System integrators and VARs can either become ASPs themselves, since they already have the crucial systems implementation and integration skills, or become much-sought-after partners for ASPs. Hunter, who is also the sales and marketing vice president of C Me Run, an ASP, estimates that half of all ASPs are systems integrators.

Hunter said that the services provided by ASPs are often associated with hosting services, but hosting services is only one part of the equation - the other crucial parts are systems implementation, integration and support services.

"It is important to not forget how much effort is associated with installing and implementing an enterprise application. That is where the system integrators play a really important role," Hunter said.

For VARs and systems integrators who are not ASPs, there are "ample opportunities" to partner with ASPs and share in the margins, she added.

"VARs can be the feet on the street, the people that know the local market condition, that have the tight market relationships, that can move the customers from the traditional do-it-yourself model to a services model. In fact, vendors such as Great Plains have established reseller programs that can link up ASPs with VARs. I think that's an important trend that VARs should watch," said Hunter.

Responding to Gartner's research findings that 60 per cent of ASPs today will not exist in three years, Hunter said that "that figure is a bit too high".

But she also explained that the industry is increasingly focusing on particular vertical markets, or application niches, and ASPs who have taken a very broad approach will either have to scale back and focus, or merge with other players who have expertise in particular markets.

Another cause of failure for ASPs is the underestimation of the importance of partnerships, and the amount of time and effort ASPs need to invest to have an effective partnership.

"You need a set of goals for the partnership, and I don't think people have been disciplined in establishing those goals and their relationships, and thus those partnerships have failed," Hunter said.