ISP to ASP: One Easy Way to Go

The prospect of a new product line — application services — with no muss or fuss and almost no investment would make most ISPs sit up and take notice. One San Francisco company appears to be offering this.

by Gerry Blackwell

The next hot value-added service opportunity for ISPs—the new paradigm that will break the vicious ISP cycle of low and diminishing margins—is, as almost everybody knows, application hosting: transforming your ISP into an ASP (Application Service Provider).

Everybody knows it, but the question is, how do you do it? Systemsfusion, a software-services company based in San Francisco, has an answer.

Systemsfusion sells a $1,000 software product, Evolutionware, that automates the provisioning of services by ISPs—for now-standard services such as access, hosting, e-mail, and domain name registration. You can see demos of the Evolutionware customer self-service interface at the Systemsfusion site.

Survival adaptation
On its own, Evolutionware promises to reduce ISPs' costs by establishing an automated framework for customer self-care and eliminating integration costs for new services—and to open up new revenue streams as well.

Systemsfusion also offers a new service, EDeN (Evolutionware Distribution-enabled Network). EDeN will give Evolutionware ISPs access to a catalog of applications hosted by Systemsfusion or others that the ISPs can resell to customers with minimum effort on their part.

Evolutionware ISPs can host applications themselves if they want; Systemsfusion will sell them toolkits for integrating new apps. But with EDeN, they don't have to get their hands dirty with application service management. And Evolutionware looks after back office details of provisioning—billing, etc.—as well as communication with hosts.

Expanding opportunities
"We see the service providers as a key distribution channel," says Nevo Hadas, Systemsfusion's vice president of strategic partnerships. "They have a user base that is already accustomed to paying for online services. The important thing now is how to turn on that tap [for application services]."

For now, there are only three EDeN-powered applications: Planet Intra, a tool for instantly setting up intranets, Store-sense, an e-commerce solution from Kurant Corp., and CoreByte a browser-based messaging and collaboration package from CoreByte Inc.

But Systemsfusion is working on bringing additional software products into the environment, including CRM (customer relationship management) and financial packages for small-medium businesses—Systemsfusion's target end market. The company expects to have 10 apps available by the end of October.

The pace of adding software services to the EDeN catalog should pick up now that Systemsfusion has become a charter member of the Citrix Business Alliance (CBA), Hadas says. Citrix Systems Inc. is a supplier of application server software that enables applications to run on the Web.

Thinking globally
So far, about 20 ISPs have jumped on the Systemsfusion bandwagon, including PRPlaza.net Inc. of San Juan, Puerto Rico. PRPlaza.net sees an opportunity to extend its reach far beyond its current Puerto Rican base.

"Having this very avant-garde capabilty we believe provides us with an unparalleled opportunity in the Caribbean basin—not to mention South and Central America," says the company's founder and president, Frank Nazario. "For us this is very exciting."

Nazario argues that application hosting eradicates traditional constraints on where ISPs operate. "ISPs have to have a network to acquire dial-up customers," Nazario notes. "ASPs don't. As an ASP, your geographic position is a secondary matter."

Hostel takeover bid?
PRPlaza.net is already in discussions with two 400-room resort hotels as well as other prospective customers in nearby St. Martin in the Lesser Antilles. The hotels want the company to provide application services they can resell to customers via guestroom PCs.

PRPlaza.net doesn't offer dial-up services in St. Martin now, Nazario points out, and has no plans to have a physical presence there in the future.

What he needs to be able to offer the hotels is standard business packages: word processing, spreadsheets, maybe graphics—Microsoft Office in other words. Systemsfusion is evasive about the status of negotiations with individual ISVs (Independent Software Vendors), but Hadas confirms the company is talking to Microsoft.

PRPlaza.net would probably not host applications itself, Nazario says. "Given the complexity of the logistics required to run this kind of technology, and the fact that the application know-how has to be so deep, we'd prefer to have a company like Systemsfusion provide these services," he says. "In fact, I don't see any ISP taking on the ASP challenge without a logistics team like Systemsfusion behind them."

It's worth noting here that, while Nazario's enthusiasm is evidently sincere, Systemsfusion did provide his company with software and other infrastructure at low or no cost as a beta test site.

Fuzzy bottom line
As for the potential revenue stream from application services, Nazario admits the details are a little murky yet. Prices have still not been set, although he believes ASP prices in general will be so low that in the future, few customers will pay retail prices for software.

Systemsfusion will simply pass through to ISP/ASPs the charges its ISV partners establish for their products—it takes a commission from the ISV. Nazario speculates he might be able to sell Microsoft Office for $10 or $20 a month.

How much of that would go to him? He clearly doesn't know exactly, but has enough of an idea to say confidently, "We will be very comfortable operating with the kind of revenue stream [Systemsfusion is promising]."

Something for everyone
Systemsfusion, for its part, is targeting business-focused ISPs of all sizes. The first to bite have mostly been small regional players, but it does also have offerings for national Tier 1 ISPs.

For smaller companies, the costs of getting up and running with Evolutionware are minimal—$1,000 for the software, an optional $1 per domain for contracted support services, and the going rate for a dedicated P3 Intel server. Using EDeN involves no additional outlay—except the fees charged by ISVs.

"If you're a smaller service provider, you can take the product, drop it into your network and be up and running very quickly," says Hadas.

Systemsfusion pitches a good line, but clearly its attractiveness will depend on which applications it brings to the table and how quickly—and how well—it can get them there. In the meantime, Evolutionware on its own is an interesting product, but no more than that.

—End