Friday, November 24, 2000

eMarkets Drive ASP Maturity in Europe

By 2005, European application service providers (ASPs) will have a firm grip on the enterprise application landscape. ASPs will be essential for Europe's transition to eBusiness, and firms will get their first taste of these services through eMarketplace trading. This will serve as a springboard for outsourcing internal apps, according to a recent Report from Forrester Research B.V.

"Development in Europe will differ from the US, where ASP services will grow through outsourced legacy applications and concentration on intracompany processes," said Charles Homs, senior analyst at Forrester. "In Europe, ASP services will grow through green-field applications such as eCommerce and intercompany transactions conducted through eMarketplaces. The acceptance of ASPs running large, strategic enterprise applications won't come overnight, but over a period of five years companies will be pulled step by step toward ASPs through their eBusiness initiatives. Between 2000 and 2001, firms will inadvertently start to use ASP services as single business functions offered through eMarketplaces, like catalog management and logistics, will drive acceptance of outsourced applications."

Of the vendors vying for the market, Forrester believes independent software vendors (ISVs) like Oracle or SAP and telcos, are better positioned to meet clients' needs through their existing enterprise applications, robust technology infrastructures, and deep relationships with firms across Europe. Integrators like Deloitte Consulting and Arthur Andersen will leverage their system knowledge to break into the space and rely on their industry knowledge around specific verticals as a unique selling point.

"In order to manage complete processes like procurement, sales, and fulfillment across their business partners and to have the speed needed to attract new partners, companies will rely on ASPs to provide them with the most powerful new technologies combined with agile delivery," Homs added. "And as companies increasingly trade online, they will become adept at fluidly forming and disbanding partnerships -- giving rise to a new market structure -- eBusiness networks."

Forrester argues that confidence will build as companies buy non-critical supplies online while competitive pressure mounts to drive down costs as a result of the efficiencies realized by online trading hubs. In response, firms will begin trading direct materials online and move most of the procurement process to an ASP. And with some core processes now operating externally, the role of IT will begin to shift as internal staff manage supply chain management systems.

Once companies have gained confidence in the ability of ASPs to run strategic processes, they will increasingly hand over control of their financial applications to ASPs. Through the multiple eMarketplace connections offered by the ASP and a decrease in manual intervention, these corporations will benefit from lower costs for financial transactions.

"As reliance on ASPs increases, vendor lock-in and loss of control will become real threats and companies must verify the controls their ASP has in place to mitigate risk and warrant a high level of service," Homs continued. "Also, it is vital to keep contracts flexible and ensure that the right service-level agreement is in place -- a three- to five-year ASP contract, for instance, will be far too rigid in an immature market. But beyond 2005, companies will connect to ASPs that can ensure a high customer satisfaction level, keep things simple by using generic applications, and push costly industry-specific applications out to ASPs."

Online Shoppers Begin Holiday Splurge Early
U.S. home Internet shoppers almost doubled their online spending over the prior week to more than $1 billion dollars during the week of Nov. 6 - 12, a Goldman Sachs / PC Data study disclosed this week.

The study showed that U.S. shoppers spent approximately $1.2 billion online during the week. This is more than a six-fold increase over the comparable time last year when $186 million was spent.

The survey also revealed that 88 percent of respondents said they plan to spend the same or more than they did last Holiday season. Only 12.2 percent said they planned to spend less.

“We are seeing a sharper ramp in online sales this year vs. last year,” said Anthony Noto, Goldman Sachs e-commerce analyst. “This is an early indication that online sales are less of a vulnerable to slower consumer spending, as the industry is benefiting from both new shoppers in addition to the incremental purchases of individual shoppers."

“We expected online shopping to spike earlier this year as people try to get in front of the Holiday rush for online deliveries,” said Cameron Meierhoefer, Internet analyst for PC Data. “But the spending jump we just saw during the second week of November was even earlier and more pronounced than anticipated. Consumers are obviously determined to make sure Santa comes on time this year, and that children aren’t ‘Grinched’ by late deliveries.”

The survey also provides strong evidence that online shoppers are more experienced this year. Over half (53.5 percent) of online shoppers said they choose where to shop based on prior experiences with a site, which may benefit more established e-commerce veterans that have sold online for more than one Holiday season. Fewer than a quarter of online shoppers (22.7 percent) said they visited a site because they knew the brick and mortar brand.

“Many traditionally brick-and-mortar and catalog retailers have now gained significant online experience, although it appears that providing an excellent customer experience with in-stock products, timely delivery and easy site navigation are more important to attract web shoppers than a strong brand,” Meierfoefer added.

Online consumers bought more books and clothes than any other items during the week, according to the study. Over 1.2 million individuals bought books online, while an estimated 1 million bought clothing items. Toys and videos also scored significant sales.