Jamcracker is a well-financed start-up company trying to improve on the delivery of IT services despite pubic skepticism on high technology. The company's business model is akin to that of an "application service provider" even if the company itself is not an ASP. But this business model is faced with caution from its prospective customers. How can the company market this new business model of service delivery?
Robert D. Austin
Harvard Business Review (602007)
July 26, 2001
Case questions answered:
- How does Jamcracker fit in the ASP space?
- Identify the challenges that Jamcracker must address to create a sustainable business model?
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Case answers for Jamcracker
1. How does Jamcracker fit in the ASP space?
While Jamcracker’s business model was based on the idea of an application service provider (ASP), it was not an ASP. The company has worked with ASP partners to combine application services, through its enterprise IT management platform, Jamcracker Enterprise, into comprehensive offerings, including technical support and billing.
Customers could choose from the application menu in the virtual “ASP cafeteria,” and then Jamcracker would present the application services to customers as an “IT department in a box.” Customers would maintain a single contractual relationship with the company rather than a number of specialized ASPs.
Jamcracker will guarantee the quality of service and have a single point of contact for technical support. Users will sign in to the company’s website once rather than individually on each ASP site.
Jamcracker has overcome many of the problems inherent in the ASP approach, such as:
High acquisition cost of customers
Early ASPs sold their services through a direct sales force, which was costly and demanded specific skill sets. The company offered indirect distribution outlets to ASPs, which helped them minimize customer acquisition costs and made it possible for them to spend more time on operations.
Conflict between the scope of ASP offerings and economies of scale
ASP offerings have often become difficult to market as they have addressed a very small problem for the businesses they consider. Through aggregating the applications of multiple ASPs to a kit, the company allowed ASPs to specialize operationally while integrating with other ASPs’ applications to address a broader outsourcing issue for customers.
Jamcracker has allowed data transfer between different ASPs to avoid unnecessary data entry. Initially, the company based its selling efforts on small businesses that wanted new technology but could not get sufficiently large IT workers and could not afford big investments.
These businesses were large enough to produce substantial profits but small enough so that Jamcracker’s early applications could provide them with value. Jamcracker chose to start with…