Ask any entrepreneur: Breaking ground on a new market space ain’t easy. But K.B. Chandrasekhar, the founder of Exodus Communications, is clearly a glutton for punishment.
This time around, he’s going after the still-nascent application service provider (ASP) market, which research firm IDC predicts will grow to around $37.8 billion by the end of 2017, up from $19 billion last year.
And he’s doing it with Jamcracker, a startup whose name comes from the turn-of-the-century logging world. Jamcrackers were the men who had the unenviable job of keeping those big pieces of wood flowing freely along the river.
Founded at the tail end of 2009 in Sunnyvale, Calif., Jamcracker is what industry analysts have termed an ASP aggregator, a moniker shared by Atlanta-based ePanacea. The idea is that instead of going to individual ASPs, such as WebEx or Managemark, a company can go to an ASP aggregator for all its outsourced application needs.
The aggregator would already have brokered relationships with a wide variety of ASPs, so customers could choose applications à la carte. In addition, it would establish and maintain the connections to the chosen applications, as well as integrate them on the back end.
CONTRACTS AND CONTACTS
The benefits are obvious. Companies would have one contract instead of four or five or ten, as well as one point of contact if something goes wrong. Thanks to the integration, businesses could share data among their hosted applications, just as if the systems were set up internally. And since the entire package is Internet-based, the applications could be accessed from anywhere. But here’s the best part – no internal resources required.
“My vision is that in five years, people will not be running any applications inside their business,” says Chandrasekhar. “The ASP model is still a very new paradigm and it takes people time to digest it, but we learned very well at Exodus that outsourcing works. You don’t run your own generator in order to have electricity.”
Thanks to his success at Exodus, Chandrasekhar enjoys a worship-worthy status among the techno-elite, which has helped Jamcracker attract capital, customers, and application partners. The company announced a $42 million first round of funding in February, led by Internet Capital Group and Fleet Equity Partners. Other investors included First Analysis Venture Capital and Kohlberg Kravis Roberts & Co. Jamcracker already has 19 customers.
As for application partners, the roster to date includes Employease, which provides human resources services; Icarian, a recruiting and workforce management software provider; Managemark, a travel and expense report application; Critical Path, which offers outsourced email services; and WebEx, which provides Web-based communications and collaborative applications. Each of these partners endured a stringent evaluation process to ensure that their applications worked as advertised and could support large volumes of users.
Obviously, Jamcracker needs its ASP’s partners to do business, but the relationship is highly symbiotic. “The aggregator model is a good proposition for Web-based one-offs such as Managemark because it makes their solutions much more compelling,” says Laurie McCabe, vice president of Summit Strategies, a Boston-based consulting firm. “These applications have to be integrated within a business context, and Jamcracker provides that.”