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Now They’re Selling Service

Application service providers are beginning to realize that service is their middle name.

For executives at Sterngold, the rise of the Internet was nothing to smile at. Despite more than a century of dominance in manufacturing restorative dental products, the company watched helplessly as competitors gnawed away at its business with slick Web sites that provided reams of product data and a convenient way for busy dentists to order products online. A strong response was vital, but with only two people in its IT department, the Attleboro, Massachusetts- based company felt toothless in the face of E-business.

It was a situation tailor-made for an application service provider (ASP), and, in fact, Stern-gold did tap one for an E-commerce system that could bring its more than 4,000 products to the attention of Web- savvy dentists the world over. But the way in which the company shopped for a partner and structured the deal may be more noteworthy than what the software can do, for it says much about the changing nature of ASPs.

Almost unheard of two years ago, today ASPs are deemed by some to be in their “second generation,” a rapid maturation that has occasioned considerable growing pains–with more to come. A widely quoted prediction by analyst firm Gartner holds that 60 percent of today’s players won’t be around by the end of next year. But corporate customers will likely find one source of solace: the hundreds of companies that survive will be keenly focused on service in a way their ex-competitors were not.

For that, thank such companies as Sterngold, which are sending a strong signal to the market that what they want is not only faster, less-expensive access to software, but also a working partnership with their ASP that emphasizes service. Sterngold evaluated a number of companies, from IBM to Pandesic, the high-profile alliance between SAP and Intel whose collapse last summer snapped the ASP world back to reality. Ultimately, it chose a product called OneCommerce, from OneSoft Corp., in McLean, Virginia.

Sterngold could have struck a deal directly with the vendor, which, like many software companies today, gives customers the option of buying the software outright or renting it in an ASP model. But Gordon Craig, director of marketing for Sterngold, says his company decided to access the software through an ASP called Surebridge Inc., of Lexington, Massachusetts, because Surebridge could provide better service at lower cost. “They’re local, for one thing,” he says. That made a difference, because Surebridge devoted nine staff members to the project, many of whom spent time at Sterngold. “The travel and hotel expenses for OneSoft people would have added up,” says Craig. “Plus, it’s nice to work with someone local; you can get together anytime you have an idea or a question.”

It wasn’t merely that those nine staffers came without airfare and hotel expenses attached, however; it was the fact that Surebridge was willing to throw so much manpower at the job. That allowed Sterngold, late to the Web, to get up and running with E-commerce capabilities in about 15 weeks. And Surebridge made sure that the company’s customer service, long an important competitive advantage, translated well to the Web environment. “We wanted all the things that companies usually want from ASPs,” says Craig: “a turnkey system that’s easy to use, flexible, scalable, and that gives us a lot of power without a big capital outlay up front.”

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