Ray Lane: Don’t Count ASPs Out

Speaking at a lunch reception here hosted by Salesforce.com, Lane, now with investment firm Kleiner, Perkins, Caufield and Byers, said the reason the ASP model failed was more a timing issue than one of having a bad business model.

ASPs spent all of their investment funds on infrastructure to support applications, and didn't have time to recoup that investment in revenue because of the dot.com bust and the subsequent recession, he said.

"ASPs came in when the [industry] structure collapsed under them," Lane said. "The ASP model will come back. It's a model that needs a lot of upfront capital, and this is not the market to [provide] that."

Lane said that it's foolish to think that any company's particular software actually creates value in the enterprise. Instead, he said, it's the ability "to get information when you need it" that is valuable to a company.

"I don't know of a single feature in a sales-force system or an HR system that gives you any competitive advantage," Lane said. "The information you can access with that system provides [the advantage]."

This is why Lane said he supports the ASP-like model employed by Salesforce.com, led by former Oracle cohort Mark Benioff. "Salesforce.com is a great example of the new model," Lane said.

He added that current large software companies like Microsoft, SAP and Oracle don't have the "DNA" to provide services instead of software, and likely wouldn't be successful moving to a service-oriented model.

Lane said Kleiner-Perkins currently has several ASPs in its portfolio, including Corio, and he expects them to be very successful in the future.

Benioff has said Salesforce.com will reach profitability next quarter, but would not confirm if the company was still on schedule to do this when CRN asked him at the luncheon. Benioff said only that the company "was in the zone" of profitability, and that "many good things" will be happening in the near term.

Reeling off current statistics for Salesforce.com, Benioff said the company currently has 70,000 users of its service, representing 5,100 customers in 107 countries.