The Growth of ASP Content Management
The content-management space has followed a predictable trajectory as far as enterprise software goes. Several early market entrants grew to take a large share of the market. And in the past few years, newcomers have exploded, leading now to inevitable industry consolidation.
Outside the traditional drivers in the enterprise software market, though, a larger industry pressure looms that has the potential to change not just how content management, but how enterprise software, more generally is purchased and deployed. This pressure comes from the unlikely resurgence of a kind of business thought to have been wiped out by the collapse of Web businesses over the last few years: the ASP (Application Service Provider).
It turns out, as the old saying goes, that rumors of the death of the ASP model have been greatly exaggerated. To understand how the ASP model is poised to shake up the world of content management, a little background on the ASP phenomenon is important.
The Birth of a New Business Model
As the Web exploded, people first began to think seriously about alternatives to traditional software delivery. Firms like EDS had pioneered independently “managed” software solutions, but that entailed little more than changing the physical location of the installed software. Servers and software licenses still had to be purchased, software had to be installed and configured, and there were significant ongoing maintenance costs to keep the infrastructure up and running.
The Web offered a shift in this paradigm. Large enterprises were comfortable contracting with outside firms to manage their entire IT infrastructure (often off-site) and typically gave individual employees access to that infrastructure remotely. The next logical step: why not contract with the software developer directly to maintain the infrastructure and software? Who would know better than the developer how to optimize the solution?
With this insight, the ASP was born.
The first ASPs, then, were simply companies that delivered business applications (often mission-critical) over the Web. All the application logic and data in an ASP is stored at the vendor’s data center. ASP customers access all application functions over the Web, typically using nothing more than the Web browser. No software to install, no hardware to install, and no maintenance-not a bad proposition!
Core-Business and the ASP
The business justification of the ASP model is straightforward and would be recognizable even to business thinkers from a century ago. At its simplest, the ASP model plays on the fundamental tension between core- and non-core business functions. Most businesses, so the reasoning goes, are very good at only a small handful of business functions. This group of functions is the “core business” and anything not related directly to the core business may be a good candidate for outsourcing to another company. (“Your back office is someone else’s front office” is a saying that conveys that idea neatly.)
To take a business school approach to the question, let’s examine a turn-of-the-century newspaper publisher as an example. What is the publisher’s core business? Early newspaper publishers saw their core business as “creating a newspaper.” In this context, it made sense for the publisher to build and maintain a printing press and perhaps even have a hand in creating the raw materials (paper and ink). But no one would expect the publisher to own the forest or lumber mills that are instrumental in turning trees to paper-both are too far removed from the core business and so are outsourced.
Soon, some publishers realized that they weren’t really in the business of creating newspapers after all. They were actually in the business of creating content. And so they focused on that core business, building impressive news staffs and editorial services and beginning to outsource the non-core business-by contracting with independent printers and distributors for the delivery of the final product.
And finally, some newspapers eventually realized they weren’t really in the content business at all. Rather, they were in the business of aggregating local audiences to sell to local advertisers. So, they outsourced the non-core functions of printing (to independent printers) and even much of the content creation (to content syndicators like the Associated Press and Reuters) and focused efforts on the core business of selling newspaper ads.
ASPs look for similar dynamics in the markets they serve. When does an industry’s business shift in such a way that certain information technology functions are no longer core? I’ll answer that question with regard to Web content management in just a minute.
ASP, Hosted Applications, MSP-Different Terms, Same Idea
Between 1998 and 2000, ASPs attracted a lot of attention. The proposed benefits were staggering: dramatically lower total cost of ownership and a single monthly fee that encompassed hardware, software, maintenance and service. Venture money poured into start-ups pursuing the ASP model.
And then the bottom dropped out. As the capital markets collapsed, ASPs that had not yet achieved enough momentum to support operations independent of their venture capital lifeline disappeared overnight. For customers of many ASPs, the unthinkable happened as mission critical data was wiped out or locked up during lengthy bankruptcy proceedings. I know one CEO who flew to San Francisco, marched up to the (mostly empty) offices of an ASP where much of his company’s billing information was stored, and didn’t leave until he had the data he needed on a floppy disk in his briefcase.
In the blink of an eye, ASP became a bad word, virtually synonymous with the over-exuberance of the dot.com era.
But even a basic analysis of the economics underlying the software industry revealed to a lot of people that the ASP model is quite sound, and so the experimentation has gone on quietly in the last few years.
While the central tenets of the model persisted, the name ASP was dropped like a hot potato in favor of such terms as hosted software, MSP (Managed Service Provider), and most recently Software-as-a-Service. At the core, of course, all of these terms really mean the same thing-someone else besides the end-user (or his or her company) is responsible for maintaining the infrastructure required to deliver the software.
The New ASP Pioneers
Largely because of the different terms that are used to describe hosted software solutions, an awful lot of activity is happening across many different categories of enterprise class software that has stayed below the radar.
For instance, with as much noise as a company like SalesForce.com has made in the sales force automation (SFA) and customer relationship management (CRM) space, it’s only now attracting the interest of the press as an example of how the ASP model can be successfully applied to a well-established enterprise software category.
And while the SFA and CRM spaces have provided fertile ground for companies like SalesForce.com (and the followers it has created), it turns out that there are plenty of other categories of enterprise software that are well suited for vendors interested in deploying ASP solutions. One of the most interesting categories in this respect is Web content management.
Hosted Content Management Basics
It can be argued that, of all the categories of enterprise software, Web content-management software is the one best suited for delivery in a hosted format.
First, in most industries, Web content management tends to pass the usual tests in evaluating core versus non-core business functions with flying colors. Even traditional media companies publishing on the Web, for example, increasingly look at their core businesses as “creating content” and not “creating a Web site.” The printing press analogy is a good one here-once it becomes clear what is core and what is not, the non-core is most likely fated for outsourcing.
With Web content management, hosted (ASP) solutions are simply the most efficient and elegant way to outsource the function.
A hosted Web content-management system usually looks no different to the end-user (the everyday site administrator or editor, for instance) than an installed solution. Many applications in the enterprise today have Web browser (or browser-like) interfaces. And because of the efficiencies of the Internet, it doesn’t really matter to the user whether the program driving that interface is next door or across the country.
In some ways then, the hosted versus installed question is more semantic than anything. A CTO I know is fond of saying “in the end, all enterprise software is `hosted.’ The only question is who is doing the hosting.”
The Real Benefits of a Hosted CMS
There are two primary ways that hosted Web CMSs are deployed in the enterprise today: as a platform for the entire Web content-management infrastructure and as a complement to an existing Web CMS installation.
The benefits of the “platform” approach to a Web CMS are just what might be expected of an outsourced provider. Chiefly, because maintaining a sophisticated Web CMS platform is a hosted CMS vendor’s core business, a good vendor is typically able to deliver a much higher quality service than the equivalent function run in-house.
Put it this way: if your company’s Web site goes down, the rest of the company keeps going. If all of a Web CMS vendor’s customer sites go down, that vendor is in big trouble. Because hosting a Web content management solution is the vendor’s core business, that vendor is likely to be more concerned about getting the job done right. Indeed, the business’s very existence depends on it.
The cost differences between hosted and installed Web CMS solutions can be enormous too, especially when considering one of the biggest efficiencies gained in this kind of deployment: it becomes possible for a business to have access to all the benefits of a scalable, robust platform running a high-performance, enterprise-class CMS application while paying for only a fraction of the retail costs of those benefits. Returning to our printing press analogy, it becomes possible for a company to pay, say, 1/20th the total cost for a top-of-the-line printing press and have (time limited) access to 100 percent of the machine. (1/20th of a printing press wouldn’t be very useful would it?)
The upshot here is that clients of ASP content-management vendors can effectively “rent” some space on a network that would otherwise cost hundreds of thousands of dollars to build-for prices as low as $1,000 per month.
The second way that enterprises use hosted content-management systems these days is to complement existing CMS implementations. For instance, for a variety of reasons many of the installed CMS solutions lack even basic support for email newsletters. Meanwhile, most hosted Web CMS vendors provide built-in support for email newsletters, and, as a result, many organizations that are not ready to make a full platform switch elect to use hosted CMS platforms that support email newsletters as a complement to their existing Web CMS applications.
The beauty of hosted solutions is that they typically integrate very well with existing Web CMSs and can add functionality at very reasonable price points.
Thinking Long Term
Even the big software companies are beginning to share a vision of a world where software looks more like a utility and less like a locally installed and managed application. Over the long term, these experts argue, we will treat applications the way we treat electricity or (perhaps more aptly) pay television-we simply plug into the wall and are charged by how much of the service we use.
Companies like Microsoft, Intuit, and IBM have begun to experiment with this kind of software delivery, in at least some part because of the success of upstart ASP companies that have captured significant share in big enterprise software segments at alarming rates. SFA and CRM are two related spaces where a lot of the early battles have been fought. The recent surge in the success of hosted content-management vendors suggests that it will be one of the next categories to embrace the ASP.
Regardless of what is happening at the industry level, though, any organization that is thinking critically about content management needs to seriously consider hosted content management. Through an insource the core and outsource the non-core evaluation, many companies will find that going with an ASP for Web content management will help keep Web costs extremely low and keep the business focused on the elements that ultimately drive long-term success.