February 21, 2000

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Carriers Target The Growing ASP Market

By Bob Wallace

n their quests to become all things to all people, AT&T and MCI WorldCom have developed strategies to attract nontraditional customers--application service providers looking for robust networks. And even though they're not the direct targets of the carriers' ASP programs, business customers will benefit from them in the form of new services, upgraded Internet backbone nets, and more-advanced hosting centers.

Both carriers view the ASP market as an important one. AT&T says it will spend $250 million, MCI WorldCom several hundred million dollars to upgrade infrastructure.

The ASP appeal shouldn't come as a surprise to IT executives, because AT&T and MCI WorldCom are diving into every growth market. The ASP market is projected to grow from roughly $2 billion in revenue last year to more than $11 billion in 2003, according to Forrester Research.

Both carriers have adopted similar ASP strategies for now: Sell infrastructure and partner with vendors to sell support services. Only AT&T has formally unveiled its program, which includes a new content-distribution service and heavy marketing support. With AT&T's EcoSystem for ASP program, the budding supercarrier goes beyond selling IP pipes and teams with vendors to develop ancillary hosting center offerings. And AT&T offers varying levels of co-marketing based on how much ASPs buy from them. Details of MCI WorldCom's ASP program are expected in the next few months.

The carriers' longer-term ASP strategies differ. AT&T has flatly stated that it won't become an ASP; MCI WorldCom won't rule out such an option. "We want all ASPs to use our infrastructure, from our public data network to IP access to hosting facilities,'' says Kathleen Earley, president of AT&T's Internet and data services group. "But we're not an applications software company. Our strategy is not to rent anything beyond communications applications like fax, E-mail, and telephony."

Fred Briggs, MCI WorldCom's chief technology officer, won't close the door on someday becoming an ASP. "Today we do everything except touch the application," he says. "Will we become an ASP in the next six months? Maybe not. But in this space, you can never say never. If our customers push us, we'll head in. Would we buy an ASP? It's certainly possible."

The good news is that the upgrades and services that carriers are creating for ASPs will help business customers. "While longer-term, corporate users may benefit more from renting applications from ASPs that carrier programs have helped," says Daniel Briere, president of consulting firm TeleChoice, "the nearer-term benefits to users are content-distribution services, higher-bandwidth backbones, as well as additional and more-robust centers for Web hosting.'' For example, AT&T's Intelligent Content Distribution Service was established for ASPs, but AT&T is also selling it to businesses.

One aspiring supercarrier leaves no questions about its ASP strategy. Upstart Qwest Communications Inc. last June launched an ASP unit dubbed Qwest Cyber.Solutions. Aided by a partnership with consulting-services firm KPMG that initially brought the fledgling unit 500 certified applications specialists, Cyber.Solutions rents managed applications from Microsoft, Oracle, PeopleSoft, SAP, and Siebel Systems, and racked up $100 million in revenue from more than 100 customers by the close of last year. It didn't hurt Qwest's profile that Microsoft invested $200 million in the company. The carrier also runs a wholesale ASP program aimed at emerging and prospective ASPs, dubbed Q.ASP, that provides vendors with networking services and hosting facilities.

Will Weider, CIO at Trinity Regional Health System in Rock Island, Ill., says he was hesitant to embrace the ASP model at first. "But now, I'm loving the idea because we'd be spending an ungodly amount of time buying the hardware, configuring the servers, testing the software, and monitoring the system. With an ASP, they handle all that, which will probably cut several months of application deployment time." He has no concerns about renting an app directly from a carrier. "I clearly see the ASP model as the future."

Return to main story, "The Next Frontier."

Illustration by William Rieser

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