December 24, 2004 Note (this is an edited version of original story written May 23, 2003)
In the height of the "dot com" frenzy a class of companies emerged called Application Service Providers (ASP). The ASPs claimed to solve all known business problems by providing applications over the Internet. Solutions covered a wide range of activities from integration of the supply chain to a complete implementation of "office" functionality – spreadsheet, word processor, data base, presentation capability, etc. The value proposition was that you no longer had to buy Microsoft Office – you could just use that functionality via a server over the Internet. The problem with many of the ASP offerings was that they didn’t solve things that were perceived as problems.
Although I continue to be enthusiastic about the vast potential of the Internet, I felt at the time that the ASP model was premature — primarily because there were not enough people with always on, high quality, reliable, connections to the net. (network computers suffered from the same problem). On top of the network issue was the fact that the ASP solutions introduced were of questionable value and the result was that the ASP model essentially disappeared. What goes around, comes around – the ASP is back. The successful ones will be On Demand businesses.
I believe now is the time for the reincarnation of the ASP as a valid and important business model. Tens of millions of people, either at home with their cable modem or DSL or at work with a high speed wired or wireless (WiFi) connection, now have access to always on, reliable, and fast Internet connectivity. There is no need for an ASP to provide an "office" desktop from a server via the Internet – it is already on the Linux, Mac, or Windows PC. The new generation of ASP (the name will probably not re-emerge) will focus on the delivery of high value applications – some classical and some new. The new generation of ASP’s will provide applications that can not be done on a stand-alone PC. They will also be businesses “on demand” – a term we will be hearing more and more about (and a new blog category on patrickWeb)..
On demand businesses share important characteristics, the most basic of which is delivering value-added results to their customers — whenever their customers need it. Twenty-four by seven is “jacks or better” – that in itself does not make a business an on demand business. Not that 24×7 is that easy to achieve; especially as a business scales up to a very large one. 24×7 means not just “always on” but also “everywhere”. WiFi enabled businesses will make their services available to all their constituencies whenever they want, wherever they are, and using whatever kind of device is being used to connect to the Internet..
There are two other very important elements to being an on demand business. First and foremost is integration. An on demand business has integrated all of its processes so that the business presents one face to the customer. Buy it online and return it to the store. But at the store and return it via an online request and then ship to a centralized location. Download support materials or place a service call on line – regardless of how you made the purchase. On demand businesses are not just “click here to buy”. They also enable click here to initiate a chat session or video window with a real live person. If you call an on demand business by phone and ask them something about the web site they don’t say “that’s a different department”. On demand businesses do not have the words “fax this form” or “call Monday – Friday, 9 to 5”. They don’t pretend to be a global business and then say to call a 1-800 number “9-5 Central Standard Time”. They don’t say click here or call our inside sales desk for the “location of a store near you”. On demand businesses offer a people-oriented and user-friendly integrated and comprehensive experience for all their constituencies – employees on the intranet, suppliers, customers, partners, analysts, and prospective constituents.
In the months and years ahead, successful on demand businesses will share another attribute – competitiveness. The on demand channel will need to be competitive versus any channel of any competitor. On demand businesses will not have achieved 24×7 by making everything redundant but rather will use autonomic and grid computing capabilities to allow their system to achieve the effect of redundancy by virtualization of their resources and intelligent and automatic sharing of those resources. It will gain cost advantage by creating an on demand operating environment that allows them to expand capacity “on the fly” to meet unexpected needs of customers. Ultimately most on demand businesses will either become a computing utility or use one.
Few, if any, truly on demand businesses exist at this stage, but they are beginning to emerge. IBM is in the forefront – both at becoming on demand and helping it’s customers become on demand. There is quite a bit of information at IBM. Amy Wohl has also written quite a bit about the subject which you can find on her web site.
Information oriented businesses have a leg up because they don’t have as many physical assets to integrate. I use a number of these business services personally and find them to add great value to the things I do. I’ll describe them and also some business-to-business businesses that are striving for on demand status.
Copytalk is a service which delivers your email to any phone, reads it to you, and allows you to reply immediately. You can also dictate new email, contacts, to do’s, or appointments. You can store all your “nicknames” at Copytalk and then use them for dictation. Newly dictated information shows up automatically in your contact list, to do list, calendar, or in-box. Copytalk sends real-text email on your behalf, just as if it came from your PC or PDA. Copytalk provides their services on a subscription basis – for a monthly fee. In a sense, it is like having your own private assistant. The dictation is routed from Copytalk to a transcription center in India and other parts of Asia. I have found the accuracy to be 99+ %.
Note: The original On Demand story was dictated using Copytalk while sitting at a picnic bench at an Arby’s sandwich shop on Route 6 in Hawley, Pennsylvania during a break from a motorcycle ride.
stamps.com is a service which provides a fully end-to-end mailing service. After selecting a person from your Outlook contact list, you then select the type of mailing — envelope, small package, large package, etc. — and then select the weight. The weight can actually be inputted automatically from a digital scale. The address is validated online against the United States Postal Service database of all valid deliverable addresses. You are assured that the address will be one recognizable by the postal delivery people. The postage is computed and then printed with bar codes for authenticity on any of a wide choice of printers. You then place your package in your mailbox, where the USPS carrier picks it up for delivery. If you use Priority Mail, you get an economical, reliable and speedy delivery. You can also use the certified, delivery confirmation, and insurance options.
eFax is a monthly subscription service that provides both inbound and outbound fax services. For inbound fax I have a permanent fax number (866-422-5817). Anyone sending a fax to that number does not know the difference, but I will receive their fax in my email inbox. I then can view, zoom in or out, crop, forward with a digital signature, store, print, or markup with “rubber stamp” notations such as "received". When I want to send a fax I can do so directly from my email program or from any application or by scanning a document on a flatbed scanner and then send it as an email attachment or directly to someone’s fax machine. A recipient of an eFax attachment also receives a link to download a free program called eFax Messenger Plus which offers most of the functions that a subscriber would have. eFax has allowed me to get rid of my fax machine (on eBay) and also free up a dedicated phone line.
There are a number of innovative information oriented services emerging in the entertainment space also.
Netflix is a DVD rental service. According to their annual report, they spend more than 10% of their revenue on information technology. If you have used their service you can see the impact. The sign-up process on the website is incredibly simple and monthly service plans are available to match your needs. To get started you select DVDs from their database of more than 15,000 choices. In a couple of days the first two (or more depending on which plan you chose) DVDs arrive from the NetFlix distribution center closest to you that has the DVD you chose in stock. Each DVD arrives in a re-mailer package — self addressed with pre-paid postage. You can keep the DVDs as long as you want — really. There are no late fees. When you send back a DVD, Netflix automatically sends you the next DVD from the list of choices you made on their website. You can make the list as long as you like and you organize the list in the sequence in which you would like to receive them. You get new DVDs as fast as you send back the ones you have watched — and so on. The speed of distribution is amazing. You can just imagine the automation that operates on the bar-coded DVD-carrying envelopes. Netflix and TiVo have teamed up and soon you will be able to download an HDTV movie from Netflix to your personal video recorder.
XM Radio has millions of tracks of digital music stored on IBM RAID storage connected to xSeries eServers. The music is organized into 100 channels. The content is beamed up to satellites which in turn broadcast it to your car or home. The service is $10 per month for your first receiver and $6.99 for an additional one. You can actually move one receiver back and forth between your home and car. Most of the channels have no advertising. Crystal clear CD stereo quality music. You can drive coast to coast and never change the channel! The channels also include the BBC, CNN, CNBC, Fox News, ESPN, Comedy, Children’s content, and more. You can now get a PC version of XM Radio and scan for your favorite music and other functions.
We all know that the economy overall is becoming more services based. You can see it on a personal level in the services I have just described. They are not inexpensive when you add it up but they add a lot of value. You can also see the shift that they represent. No more fax machines, no more trips to rent movies, no late fees, no purchases of CD’s, more effective communications through dictation, and fewer trips to the post office. Putting them all together they become a suite of information services that leverage my productivity and enhance my free time.
One last example – this is one I do not use personally – of a services oriented business that I find quite interesting is e-Suds.
IBM and USA Technologies haveWeb-enabled 9,000 washing machines and dryers at U.S. colleges and universities in the mid-west. Prior to e-Suds, a student might make the trek to the laundromat to find out either that there were no machines available or worse yet, that their clothes had been emptied from a dryer onto the floor so someone else could use it. e-Suds replaces traditional coin-operated technology with a new method that allows students to pay with the swipe of an ID card or the push of a few buttons on a cell phone.
American Sales (ASI), Inc provided the e-Suds-enabled machines. They are connected in a local area network using WiFi and then linked to back-end systems hosted by IBM which integrates the washing machines and dryers with inventory and payment systems. USA Technology provides the software applications which make transactions of less than a dollar (micro-payments) cost effective.
Using the system, students can visit a Web site to find out when a machine will be available. They can select various functions, such as the dispensing of soap and fabric softener – choosing from a range of products in storage bins attached to each machine. When the wash is done, they are notified via an email sent to their pagers or PCs.
Laundromat owners go online to monitor machine performance and conduct proactive maintenance, as well as check filter clogs, water temperature and usage patterns – helping to reduce the need for on-site service calls.
Knovel Corporation is a good example of a high value, high-end application service on the Internet. Knovel is an information service that dramatically increases productivity for engineers and scientists. There are documented cases where Knovel has saved up to 75% of the time traditionally spent in the technical information research and analysis process by replacing traditional hard-bound reference manuals with a user-friendly and highly intuitive web interface that makes searching across many sources quite easy and then converts tables of numbers into interactive tools for analysis, calculations, and graphing. The Knovel service, along with it’s online access to hundreds of the world’s top technical reference manuals delivers fast, accurate and complete answers for scientists, engineers, technicians, information professionals, and students in many sectors including chemical, medical device, pharmaceutical, automotive, insurance, heavy equipment, aerospace, and academia.
Disclosure: I am in investor in and member of the board of directors of Knovel.
myUSPS.com is similar to stamps.com. I use UPS for larger packages that will not fit in my mailbox for pickup. Since I have to take a larger package somewhere anyway, it is easiest to just drive through town and spot a brown truck where the driver happily takes the package. You can also drop packages off at MailBoxes Etc. (many of which have now been renamed as “The UPS Store”). myUSPS.com allows you to store your shipping addresses on their server and remembers various things about your shipments. It also provides tracking, email confirmation of pickups and deliveries, an audit trail of all of your shipping activity, and numerous other services. They have thought through the shipping process from end to end and have made it all available through their on-line service. UPS has a vast array of information technology to make all this happen, including more than a dozen IBM mainframes plus thousands of smaller servers and tens of thousands of PCs. They are committed to developing a completely on demand computing infrastructure and are well down the path to making it happen.
Major companies like UPS, American Express, Charles Schwab, and others are investing heavily to become on demand businesses. There are many startup companies that are emerging to become on demand businesses but the existing companies have significant advantages. They have loyal customers and employees, access to capital, channels of distribution, and information technology infrastructure. They also have many legacy applications which can be an asset or a liability in an on demand world. If they get them integrated, they will be able to leverage their considerable assets and be very successful. On demand will ultimately simplify our lives and give us more discretionary time.
