Telecom: third crack at ASP

Telecom will design its own ASP product after announcing that it has ditched its current ASP partner, GDC Communications.

Telecom will design its own ASP product after announcing that it has ditched its current ASP partner, GDC Communications.

Telecom has been quietly reselling GDC’s iVASP service but never formally launched the product, named Officeware, see Telecom: second crack at ASP. The two companies have now agreed to an early termination to their contract, which was due to expire in October 2004.

ASP (application service provider) products are delivered to client computers over a network, and usually sold on a subscription basis.

Hugh McKellar, Telecom Advanced Solutions’ business manager for commerce services, says the company will redesign Officeware to include ASP applications from a variety of sources.

“We have been working with GDC for probably a year now, working through business models and various things but at the end of the day it wasn’t delivering for either company,” McKellar says.

“It didn’t work in terms of customers and sales and an integrated approach, which we really didn’t achieve. We have learnt a lot about our wider business model, and it really is that tighter, integrated offering that customers wanted.”

McKellar declines to disclose the number of customers Telecom signed up, but agrees with Computerworld Online’s suggestion that it is less than five. “That’s probably true … it’s not a lot.”

Although he won’t name the companies involved in the repackaging Officeware until contracts have been signed, he does expect Microsoft Office will be one of the applications available. “It’s not there at this point, but it’s certainly anticipated that it will be.”

Existing customers will be supported, McKellar says, and will be moved to Telecom’s new product when it is released. “The agreement with [GDC] is that no customer will be impacted.”

To date, GDC has hosted the Officeware applications, but McKellar says Telecom will now deliver Officeware from its own data centres.

Officeware contracts will include service level agreements to reassure customers concerned that network outages could prevent them from using Officeware, he says.

GDC issued an announcement to the stock exchange on Friday saying that it expected a “minimal” impact from Telecom’s decision to offer its own ASP service. Managing director Geoff Lawrie said GDC had put a significant effort into supporting Telecom for negligible benefits.

“We regard Telecom’s decision to develop its own ASP service as a vote of confidence in the validity of the ASP service model,” he said.

GDC shares, which sold for over $1.20 in January 2003, were down two cents in trading on Friday to 19c.

It’s Telecom’s second recent snub of GDC. Last month GDC found itself removed from Telecom’s slimmed-down list of patch contractors (see GDC stumbles with huge loss), which had brought GDC about $40 million of annual revenue.

Telecom is essentially designing its third ASP product. In February 2000 Telecom, EDS and Microsoft banded together to create Esolutions, a “virtual” joint venture to offer ASP products. The ASP market didn’t meet early expectations and in April 2001 the company ceased development of ASP solutions and described itself as an e-commerce infrastructure provider.

In July 2002 Esolutions was folded into Telecom’s Advanced Solutions Group.

McKellar is confident that ASP products can succeed in New Zealand. “It feels as if the time is right,” he says. “The infrastructure that supports ASP has matured.”

The ASP market is currently worth about $12 million annually in New Zealand, McKellar says. “I think it’s expected to be close to $50 million by 2007.”

Telecom is likely to bundle Internet connections with its Officeware products, McKellar says. He’s not concerned that other ASP vendors use Telecom’s network to deliver their products. “There’s every reason for that to continue and we’d support it.”

Asked whether Telecom expects to “own” the ASP market, McKellar says the company would “certainly want to be a major player.” He expects Telecom to be approaching potential customers for Officeware in March. Pricing will be announced over the next few months.

Telecom says it will use Computerland to provide on-site services, support and hardware for Officeware customers.

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