Amid speculation of bypassing its traditional channel, Microsoft has announced plans to offer customers the ability to rent its Office software suite over the internet. Giving the ASP market a huge credibility boost, recent research by IDC and Forrester puts the projected worth of the market for application rental between $5bn and $6.4bn over the next three years. However, although most industry watchers predict the ASP market will be a money spinner due to the amount of service provision associated with it, most ISVs seem unclear or unwilling as to how to fit the channel into their plans for the ASP market. Martin Brampton, chief analyst at Bloor Research, is not surprised that the ASP approach is being used in some cases to "cut out the intermediary". He said: "The internet was always predicted to make it easier to remove intermediaries that do not immediately add value. The traditional channel will not drop dead overnight, but most major corporate clients already question the benefit of Vars. Resellers are always under threat from the pace of change." Brampton added that although the ASP market provides more scope to add value, Vars will only take advantage depending on where they are already positioned. David Angwin, marketing manager for managed internet applications at Var Esoft Global, thinks few resellers have the necessary skill sets to benefit from the growth of the ASP market. He said: "Not only do many in the channel not have the skills needed, but they don't know how to deal with ASP issues such as software scalability, security and bandwidth." Although Microsoft insisted channel partners have a role to play, officials have been vague as to where the traditional channel comfortably fits within the company's ASP business model. The vendor also trod on its traditional partners' toes by revealing that BT will be its UK ASP partner during the pilot stage. It has also admitted that it will directly challenge Vars by offering Office Online to business customers itself. The vendor will offer the hosted Office suite through its dedicated SME portal, bCentral, by the beginning of next year. Oracle has also not confirmed whether its Business Online application hosting service will be offered entirely directly or through its partners, while Sun Microsystems will offer its recently acquired StarOffice software for direct online rental this year. Other questions raised by the ASP model include how it will affect sales of off-the-shelf ASP-available software, software distribution and licensing practices, as well as the future pricing of software. Justin Wright, UK managing director at Progress, claimed the company is convinced that the ASP model is a critical new route to market for its channel. He also insisted that it is a more cost-effective software delivery mechanism for Vars, as well as a way to reduce the complexity involved when selling software and services. Wright said: "Microsoft appears to want to kill the channel in the ASP space. Other vendors also seem determined to cut the channel out, but delivering software online still depends on a strong local relationship between the channel and the user." Progress has 77 partners signed up to its ASP Enablement (Aspen) programme, and Wright claimed a successful ASP approach is dependent on Vars. "The others will let you dine at the table, but you have to be cautious if you want to eat with crocodiles," he quipped. Wright added that some in the industry "traditionally blow hot and cold when it comes to the channel", so he would not be surprised if the channel is increasingly left out of vendor ASP plans. He said: "As more vendors move directly into the ASP market it will be interesting to see how many of their traditional resellers survive." Although the ASP model in Europe is still at an embryonic stage of its development, the need to drive down IT costs will force corporations to look at new alternatives as well as existing ones. At its user development conference in Berlin recently, Lotus announced its ASP system pack to offer hosted applications via a Lotus Domino and IBM Web-Sphere platform. Offering ASPs a platform to host, manage and deliver rental versions of Notes, the pack will include team collaboration, messaging and calandaring services, as well as instant messaging and shared applications from a portal-based environment. For traditional hardware and software resellers, which have reaped good margins from the client-server model, the outlook, on the surface, looks bleak. In the traditional market, good margins have been gleaned from selling software and services, while added hardware sales can be generated by selling standalone calendar servers, email servers or other messaging platforms. But ASP doesn't spell disaster for the channel, according to Cathy Daum, EMEA vice president, sales and partner marketing at Lotus. Speaking at the Eurochannels reseller conference in Berlin recently, she told PC Dealer that software licensing is not going to disappear overnight. "In certain situations, customers are still going to buy licences traditionally through resellers. But other choices will be there," she said. And these choices may involve rental. Like vendors, ASPs are going to need a channel, said Daum. In the future, she sees two types of resellers emerging: those that will transform into ASPs or offer more service-related revenue, such as outsourcing or maintenance, and those that will work in partnership with the ASPs. In other words, Daum said, the ASP model will offer resellers another potential revenue stream.
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