California Bar Journal
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ASPs: The reality begins to set in
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Dana ShultzIn February, I wrote about Application Service Providers, vendors who make their software available to customers via the Internet. Since then, both the hype and the number of ASPs have grown astronomically.

Unfortunately, increased quantity has not produced increased quality. Instead, virtually every software vendor has looked at whether to offer its products via the ASP model — often despite whether that approach makes sense for the company or its software.

Put simply, many ASPs look like network integrators did a decade ago. They have limited experience, they are struggling to find the right business model and their sales personnel lack professionalism.

In the spirit of “forewarned is forearmed,” here are my top 10 ASP gripes:

1. Unresponsive Sales Staff — Many sales reps think that a several-day response time for phone and e-mail messages is reasonable.  Perhaps they have bigger fish to fry, but none of these folks has gotten my clients’ business.

2. Questionable Product Selection — Some ASPs offer software that was not designed to operate over the Internet. MS Word via a browser? No way! (To check this out for yourself, go to the Citrix Demo Room at


3. Offerings that Don’t Yet Exist — Read promotional text carefully. Use of the future tense suggests that a product or feature is not yet available. Vaporware is just as prevalent here as it is in the software industry, generally.

4. Weak Strategic Partnerships — ASPs often rely on software resellers for implementation assistance and software customization. If the ASP and the reseller don’t have a strong relationship and well-thought-out procedures, critical tasks can fall through the cracks.

5. Unnecessary Barriers to Doing Business — An example: One ASP demands that prospective customers sign a lengthy, detailed nondisclosure agreement — the type that companies use before starting merger negotiations — before the ASP will even provide a proposal!

6. Delays Developing Proposals — ASPs can take weeks just to come up with a price quotation. If you are looking for a real proposal that explains what the vendor will do and the benefits you will receive, don’t hold your breath.

7. Few References — Some big-name ASPs serving large firms have long customer lists. With many other ASPs, you are likely to be a pioneer.

8. Stingy Contract Terms — Warranties and remedies are often even more limited than the terms network integrators offer. Try to negotiate a service level agreement (guaranteed percentage-of-time availability) with a significant financial penalty if the ASP does not meet the agreed-upon level.

9. Huge Price Variations — Order-of-magnitude price differences between ASPs make careful shopping essential. Demand a detailed list of all one-time and recurring charges.  If you have questions about why a charge is there, keep asking until you understand the answer.

10. Wasted Time and Money — Put all these problems together, and you have a high level of frustration and waste. This is especially surprising given that ASPs’ strongest selling point is that they are supposed to help their customers become more efficient!

Don’t get the wrong impression. ASPs have their place, and there are good ones. Nevertheless, today’s market is so immature and fast-moving that “caveat emptor” is the most prudent buying philosophy.

Dana Shultz is an Oakland-based attorney and certified management consultant specializing in computer technology and the Internet. He may be reached by e-mail at and on the Web at