Wholesale ASP launched for resellers
Brett Winterford (ARN)
Several former Solution 6 staff have formed a wholesale application service provider (ASP) business which offers resellers, integrators and other service providers the opportunity to resell software sold over the ASP model without having to build any of the infrastructure.
The new company, Cavillon, will host a variety of applications from AOL's data centre in Sydney, and is betting on high reseller adoption to finally make a solid business from the ASP model. These applications include messaging (from Lotus), enterprise resource planning (from SAP), customer relationship management (from Onyx) and e-commerce (from HAHT). Later in the year Cavillon will launch human resource and payroll applications, as well as document management and workflow software.
Rather than selling to end users, Cavillon is banking on a channel model where resellers offer their own branded ASP service to customers using Cavillon's infrastructure. The reseller maintains the customer relationship and billing, and can also opt to bundle the ASP services with their own services, such as desktop management.
The business came about after Kent Duston, the man who established Solution 6's Centrum ASP business, began looking into using a channel model for the Centrum business, only to have the idea rejected by the then-CEO of Solution 6, Chris Tyler.
"At Centrum we learnt the fundamental problem of the ASP business and how it is approached," he said. "A lot of companies were building ASP businesses because they could, not because people actually wanted them. There was no attention paid to the way distribution works in Australia."
Duston said there were "major limitations" to Chris Tyler's ASP strategy, in that Tyler wanted Solution 6 to deal directly with customers.
"I had a fundamental disagreement with Tyler as to where this market was going - he tended to see everything in terms of the stock market," he said. "The stock market values this many customers as X and the share price goes up. But I have always believed that building critical mass needs resellers."
Cavillon has signed up some initial resellers to trial the system, and some implementation partners to trial the customisation of the software for business needs. Dunston believes the wholesale ASP model is the "return of high margins in the industry". He said resellers have also been responding positively to the promise of recurring income streams for 12 or 36 months, instead of having to go straight back on the sales pitch after selling software.
"A lot of hardware and software resellers recently made the move into services because they were taking a hammering on product and were seeing better margins from services," he said. "With this offering, they can keep those higher margins without having to employ any additional services staff."
Photograph: Cavillon founder and CEO Kent Duston