The combination of recurring revenue, scalability, high switching costs, and an expanded market for IT should make the ASP an investor favorite. We are unsure of how smooth the market's growth will be. In order to reach the aggressive market growth forecasts, the ASP market must move across the chasm and gain acceptance among mainstream SMEs and large enterprises. The sales cycles and adoption rates of these organizations may be longer creating some choppiness in the market growth of some ASPs over the next six to 18 months. ASPs enable the extended enterprise because they move key business processes to the Net.
Distribution is key.
We view distribution as a critical component of an ASP's success. Pure-breed firms will need to partner with several key ASP enablers to present a unified interface to the end user. The only problem we see with the pure-breed ASP is the fact that the user would have to hop between Web sites and providers in order to cull together a complete enterprise solution. Most of these firms are utilizing XML and other technologies to make their applications interoperable. Moreover, firms like Jamcracker are allowing these pure-breeds to come together and be delivered through a single interface.