Micron Electronics to adopt ASP strategy

By Rawlson O'Neil King, theWHIR.com

January 16, 2001 -- (WEB HOST INDUSTRY REVIEW) -- As a price shakeout looms in the personal computer market, survival strategies and corporate transformations are being hatched. The most notable are those being planned by PC maker, Micron Electronics (micron.com).

With industry analysts indicating that corporate computers sales are heading toward a major downturn, the company intends to transform its successful hosting subsidiary, HostPro Inc. (hostpro.com ) into an enterprise-class application service provider (ASP), in a bid to resurrect revenues.

HostPro, presently one of the largest and most recognized U.S. shared and dedicated hosting providers, has already been testing the waters by offering a suite of entry-level ASP services, such as multimedia streaming, messaging and enterprise collaboration software to small and mid-sized businesses. Now the company intends to make a huge leap into complex application hosting by offering its customers accounting, payroll and human resources packages later this year, to complement the crucial elements of their financial administration.

Micron Electronics, the seventeenth largest U.S. computer manufacturer according to IDC, is making history with this move, because other computer manufacturers with strong hosting offerings such as IBM (ibm.com ) have not ventured into the ASP market segment without assistance. Indeed, Big Blue has leveraged partnerships with other large industry players in order to share costs and risks associated with application service provision.

The corporate giant has teamed up with AT&T (att.com ) and Lotus (lotus.com ) in order to jointly develop and market a new ASP-enabling suite, or Web hosting solution targeted for the application service provider market. The suite will combine secure Web hosting infrastructure, server hardware and application deployment software to meet the needs of ASPs and independent software vendors. The suite will provide the infrastructure to enable ASPs, but it will not elevate IBM to the status of an application service provider itself.

This strategy clearly demonstrates that IBM's approach toward application provision is cautious. In the wake of a recent report by the Gartner Group predicting huge consolidation of the ASP market, IBM can't be faulted for wanting to steer clear of direct industry involvement. With 60 per cent of ASPs projected to kick the bucket by the end of the year, IBM has opted to avoid offering fully-fledged homegrown ASP solutions.

This approach was abundantly transparent when IBM teamed up J.D. Edwards (jdedwards.com ), a leading e-commerce consultancy, to provide ASP hosting infrastructure to Look Communications (look.ca ), a prominent Canadian wireless telecommunications firm. IBM Global Services only provided Look Communications with access to its advanced networking technology in its Internet data centers, while J.D. Edwards provided the actual enterprise applications for the company's back-office financial and accounting processes. This fact reaffirms the notion that although IBM appreciates the cost-saving advantages that the ASP business model offers, it lacks long-term confidence in the industry.

Other PC manufacturers, such as Dell Computer (dell.com), have shunned the entire ASP industry altogether. Its Web hosting strategy still only involves the provision of shared and dedicated hosting to individuals and smaller businesses.

These are considerations that Micron Electronics might want to analyze before committing the full might of its financial and corporate resources toward an ASP strategy. It is evident that the ASP model is quite unstable in comparison to the traditional Web hosting model, and that other PC manufacturers acknowledge this fact.

About the Author
Rawlson O'Neil King is a managing editor and analyst at the Web Host Industry Review. Before joining theWHIR, Mr. King was Director of Corporate Communications at WebHosting.Com. During his tenure at Canada's most successful Web host, he established ineedsupport.com, the first branded destination customer care site in the shared hosting industry. He has prior experience as an IT consultant who served non-profit organizations, government and private industry. He holds a Bachelor of Journalism degree from Carleton University. Mr. King's column appears in theWHIR weekly.