Business Week Story Features Mike Block

HOW SOFTWARE SERVICES STACK UP Companies called application service providers sell software as a service to that's piped to customers over the Net.  HOW IT WORKS. Here's a step-by-step on how to use an ASP. NetLedger customer Michael Block, a BlockTax Accounting C.P.A., started using the accounting service last May.


When USinternetworking Inc. was launched in April, 1998, investors swarmed like yellow jackets around a honey pot. The Annapolis Md. outfit was a new kind of company - dubbed an application service provider - and it promised to transform the way software had been used by corporations for more than 30 years. Instead of selling customers large and complicated packages, usi would provide them with instant access via the web to the software packages from such established software makers as PeopleSoft Inc. and SAP. No muss, no fuss. To venture capitalists and Wall Street investors, it seemed like a blockbuster idea. They bet nearly $500 million on the company. Before long more than 500 companies were funded with a mind-numbing $10 billion in venture capital. The analysts, as it turns out, were wildly wrong. Concerns about security and internet reliability scared off many potential customers. At the same time, the ASPs faced huge costs for building data centers and licensing software packages from publishers.


The result: Their money started running out before revenues kicked in, many leaving customers hanging and waiting for solutions. By all rights, the money tap should have shut down for ASPs, but it just keeps flowing. Rather than buying packages from established companies, new contestants, including accounting company NetLedger, Inc. are building software from the ground up to run on the web making them more efficient and easier for customers to use. Is this the future of software? Indeed, plenty of people still believe that the wave of the future is offering software as a service that?s delivered to our web. There are a number of things to be done to ensure smooth transitions, such as, Do a background check on the ASP., Get a service guarantee, Plan for a disaster and be prepared to implement it, and finally get insurance. Yes there are policies guarding against data loss and computer viruses. All said and done one thing is for sure, software development and end use will be transcending new boundaries well into the 21st century.