Not all pure-play ASPs are aligned so vertically. USinternetworking Inc. and Corio Corp. are perhaps the most visible examples of horizontally aligned ASPs. USinternetworking seeks to serve a broad audience through its own set of hosting facilities and via partnerships with bandwidth vendors. This approach gives the company more complete control over its offerings, though it's relatively capital-intensive. USinternetworking has been successful in landing impressive accounts, including Hewlett-Packard, Knoll Pharmaceutical, and Liberty Mutual Insurance Group. Corio, meanwhile, has partnered with Exodus Communications Inc. and Concentric Network Corp. for hosting and bandwidth, respectively.

In the case of 1-year-old Qwest Cyber.Solutions, the joint venture from Qwest and KPMG, the latter company provides more than 400 systems and implementation personnel. Sales are through Qwest's and KPMG's existing sales forces, giving the new venture extensive reach.

Bandwidth providers, which continue to see margin pressure from a precipitous increase in competition, are jumping into the ASP game, where margins are fatter. AT&T, MCI WorldCom, Sprint, and others either have partnered with or are setting up their own ASP services. It's a trend that's likely to continue, with operations such as USinternetworking and Corio being potential partners or acquisition targets.

Finally, software vendors are entering the game. J.D. Edwards, Oracle, PeopleSoft, SAP, Siebel Systems, and others want a piece of the ASP action. For these vendors, it isn't margins that attract them-these companies are seeking a tighter association with their customers.

Historically, systems integrators, such as Andersen Consulting, have had the end-customer relationship, and if they pushed one software system over another, there wasn't much the software vendor could do about it. Many software vendors are now leveraging their extensive sales and professional-services organizations to enter the ASP fray. Software houses are also reshaping license agreements to exert more control over the product the end customer sees, regardless of who provides the service.

More interesting, however, are the new versions of applications hitting the market. Virtually none of the existing ERP applications are Web-enabled, but they will be within the next six to 12 months. Vendors will also create versions that better suit the software-as-service model of delivery, with better support for multiple users and organizations built into their software. These versions will allow ASPs to serve more than one customer with a single implementation of the software application.

Software startups are, of course, aggressively pursuing the Web-only model. Ariba, Niku, and MyWebOS.com are good examples. All three vendors seek to provide the underpinnings for Web-delivered applications. Designed for the Web, such systems are likely to give entrenched players a run for their money.

Ariba has been a darling of the investment community, being one of the early entrants in the business-to-business segment favored by Internet speculators. Ariba provides E-commerce software for buyers as well as sellers. Its buyer-related software is a somewhat unusual twist on the business-to-business game, in that it lets companies corral individual buyers within the company and direct them toward preferred vendors. That's normally the turf of purchasing departments, and to date, relatively few software vendors have gone after this market, choosing most often to cater to sellers.

Niku is both a software vendor to service providers and a service provider itself. Its products are Internet-based community-, resource-, and project-management systems aimed at Internet-centric service providers such as ASPs. Niku provides a services portal for lone contractors and small professional-services groups.

Newcomer MyWebOS.com is pushing its own operating system along with Web-based applications, such as its own productivity-software suite. Designed for the Web from the ground up, MyWebOS.com says it will provide a superior environment for developing online applications. It, too, provides a service with its own software, called MyWebOS. On the MyWebOS.com site, customers can use the company's word processor and other productivity tools, all from a browser.

While traditional client-server systems are being made to work for ASP offerings, it's like using a butter knife as a screwdriver: It'll work, but using a better tool is smarter. So, unless you have a burning need to pursue ASP services, it may be best to wait for software vendors to churn out ASP-specific versions of their programs, particularly for financial and other critical applications.