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European ASPs find business market is tough to crack: Shared risk, reward models coming into play

DUBLIN, Ireland-Software firms across Europe have developed myriad mobile applications aimed at the business market during the past few years, raising hundreds of millions of dollars in venture capital to fund their development. But with few applications being widely used and businesses fearful of outsourcing mobile applications, the wireless developer community has suffered badly.

According to Jessica Figueras at Ovum in London, suitable business applications already exist; it is just a matter of wirelessly enabling them. But this is where the good news ends for developers.

“Specialist application developers such as wireless ASPs (application service providers) are struggling, and most have had to change their business plans,” she said. “The ASP model has not worked because most customers want their applications hosted in-house.”

Figueras said there is a feeling among corporations that housing applications on site makes it easier to integrate them with business processes. “Then you have the issue of market confidence-because wireless ASPs are immature companies with a limited track record, confidence among existing and potential customers is low.”

She also claimed that developers have been guilty of over ambition, focusing on the elusive “mobile professional” without realizing that most customers are companies with much less sophisticated requirements. “Most developers have now refocused on providing a small range of applications to specific vertical markets, and many have gone bust or reduced staff numbers drastically.”

“The business model has definitely changed fundamentally,” said Mike Brady, chief executive officer (CEO) of Dublin-based application developer Anam. “Business customers are less likely to pay large license fees upfront. There is more focus on shared risk, shared reward models.”

So how can developers help themselves? “Software companies need to develop applications for mobile phones rather than PDAs (personal digital assistants),” argued London-based John Fletcher of Analysys. “Even with bulk discounts, few companies are going to spend 150 to 200 euros (US$147.50 to US$197) to provide every employee with a PDA and besides which, even businesspeople are more comfortable using their phone than a PDA.”

Stephen Drake, IDC mobile infrastructure software service program manager, said interest is growing among enterprises and vertical industries to deliver critical corporate data, such as customer relationship management (CRM), sales force automation (SFA) and enterprise resource planning (ERP), to employees, partners and customers via an array of mobile devices.

However, the difficult financial climate is putting a break on investment. “There is a lot of interest in certain mobile business applications, for example, inventory management solutions,” said Fletcher of Analysys, “but pressure on budgets means interest is not translating into implementation.”

This has lead to industry fragmentation. “Despite several players going out of business and larger vendors undergoing significant restructuring and repositioning, there are still many small vendors offering highly specialized solutions at the lower end of the market,” confirmed Denis Hennessy, chief technical officer of Wicklow, Ireland-based application developer Network365.

Ovum’s Figueras argued the situation is not totally gloomy. “There are many mobile business applications in use. They are just less glamorous applications for large enterprises with very specific requirements, such as field team management,” she said.

“Successful enterprise applications include SMS (short message service), where information can be sent quickly, and the corporate user has the added comfort of knowing that every message is stored on a secure server and delivered even if the SMS network is busy,” added Hennessy. “Mobile chat rooms are being used by sales teams to send and receive critical time-sensitive information from multiple sources while on the move.”

Fletcher supports his more pessimistic prognosis by adding that many corporate applications require detailed location information to function effectively. “GPS is not expected to be widely available any time soon, and there are still issues over whether user location should be identified through signal triangulation or via a GPS module in the handset.”

He also believes handsets with greater intelligence are required to push the business application market forward. So do developers or operators feel they are being held back from introducing new business applications by the handset vendors?

Ben Taylor in the Vodafone press office was unable to comment from an operator perspective on whether this was the case or identify any applications that have proved popular. However, Network365’s Hennessy was more forthcoming.

“There are two main problems for phone-based mobile application developers. They are being frustrated by mobile operators who are reluctant to provide them with information and services that would help them deploy useful applications. For example, it is difficult for small developers to get access to operators’ SMS gateways in order to deploy SMS-based services,” Hennessy claimed, adding that operators have also been slow to provide a means for application developers and content suppliers to charge end users for their products.

Hennessy also said developers have been constrained by the capabilities of the browser installed in most handsets. “The WAP (Wireless Application Protocol) browsers are difficult to use, and this has really discouraged the uptake of applications. Furthermore, most operators charge by the minute for WAP sessions, further discouraging the end user,” he said. GW

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