InformationWeek

"HP brings a lot of advantages in the ability to have server farms located in multiple locations," says Richard Friesen, co-founder and president of ePit. Financial-services institutions interested in launching E-markets are scattered across the globe, as are their customers, he says. "You can imagine the amount of RFPs we're involved in, and they range from the Far East to Africa to North and South America," says Sharon Gregory, director of global capital markets at HP.

According to Friesen, the ASP model is of particular interest to emerging-markets countries that don't have the investment in legacy systems. Unlike most U.S. exchanges, which run on large Tandem computers with dedicated hardware and communications lines, overseas exchanges are able to leapfrog to the most modern exchanges on a pay-as-you-go system with an ASP.

With HP's backing, ePit is targeting three distinct markets: old and new commodities exchanges, electronic trading systems such as electronic communications networks, and proprietary capital-markets trading systems. Last month, Friesen says, ePit was close to finalizing a deal with a multilevel financial institution to create a private market for over-the-counter structured products.

EPit's first customer is AgEx.com Inc., an online exchange for the $2 billion almond industry. Though ePit was originally targeting regulated exchanges, it has had a hard time breaking into the big time. Small electronic-trading startups such as ePit "need HP for capital backing, credibility, and for breaking down the barriers to sell to either exchanges or brokers that are often resistant," says Tower Group's Robert Iati, senior analyst covering business-to-business exchanges.

Ultimately, ePit's open-systems architecture for Internet delivery may gain it entry into the major banks and brokerages. One of the main mechanisms for application delivery is Pit Passport, a secure identification that will let investors access an exchange directly, Iati says. Still, it's HP's reputation for reliability and 99.9% uptime that Gregory and Friesen expect will carry the greatest weight with business and IT executives.

Despite the technical challenges, many vertical software vendors are still expected to adopt the ASP model. "The question marks will be around their ability to go away from software creation to managing data centers, which is very different and requires much higher levels of customer support and technology infrastructure," says TheBeast.com's Carrie. In addition, they must understand switches and routers and unusual firewall and processor configurations. Software companies must also learn how to partition their applications to run on the Internet and how to provide access to segments of the apps.

To differentiate itself from other ASPs, TheBeast.com is repositioning itself as a broad financial-services ASP. It will supply a virtual suite of applications on demand across capital markets, as well as application-hosting technology. The online analytics and market-data service originally debuted as a client-server application. Last month the company introduced TheBeast Online, an interactive, real-time analytics and market-data service, to which it recently added credit capabilities and equities, Carrie says.

The company is delivering services to more than 500 trial users globally, ranking from fund managers to banks to geographically challenged users in Malaysia. Most clients are cyberinitiatives or cyberspin-offs of major banks. "They've got a great idea, great capital, but they don't have the technology infrastructure to get to market," Carrie says.

TheBeast.com partnered with Level 3 Communications Inc., a network service provider, and it opened its own data center in New York for redundancy. Level 3 provides low-cost connectivity and server hosting so TheBeast.com can remotely manage the servers that run at Level 3's location.

Carrie plans to use the same technology to host other companies' applications. "If a hedge fund had a particular application that needed to be driven by all sorts of data, we could develop and deploy that application and rent that application," he says.