Email Marketing Solutions: To ASP or To License?
Unless your organization is planning to spend the time and incur the significant expense of developing a custom solution, the market presents organizations with essentially two solutions for email marketing management; Application Service Providers (ASP's) or licensed software solutions.
Posted Jun 6, 2002
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Regardless of whether a business is small to mid-sized organization or a large scale enterprise, and regardless of the strategy used to collect contacts and leads, all companies must possess some capability to broadcast email to customers and prospects. The evolution of different solutions and the ever-changing market climate requires organizations of all shapes and sizes to seriously consider both the ROI and TCO of the available solutions. Any email marketing solution must provide the following critical features in order to be effective in today's market: - Elegant list management - Elegant HTML and/or text tools for creating broadcast content - Relatively non-technical mechanisms for importing/exporting subscriber data - Anti-spam and anti-duplication features - Success measurement reporting tools - Survey tools for demographic and other analysis of subscribers Unless your organization is planning to spend the time and incur the significant expense of developing a custom solution, the market presents organizations with essentially two solutions for email marketing management; Application Service Providers (ASP's) or licensed software solutions. Application Service Providers, or ASPs, have a number of advantages over licensed software. They may be relatively inexpensive at the outset of the solution, and can usually be deployed between one and five business days, for almost instantaneous time to market. As with all ASPs, there is no infrastructure for the marketer to manage, and the organization can pay as it grows with the solution. However, many email marketing ASPs assess a minimum charge per quarter regardless of the number of emails sent, in a "use it or lose it" model. On the downside, the charges for ASPs continue forever, as long as the service is in use. All of the marketer's invested dollars during the course of the relationship with the ASP become 100% "burn rate" expenses - not assets - and amount to nothing of value (beyond however effective the campaigns may have been) if the service is cancelled. At the same time, any true integration between the ASP and an external application, for instance, a CRM system, is probably out of the question. Lastly, the risk factor is high for the end user if the ASP ceases operations. While customers can typically retrieve their data from an ASP, the real value of the data is in the way the data is organized to work with the ASP's specific application. Separated from the application, your data may no longer be as useful. Example: In the ASP's email solution, subscribers might be identified in such a way that indicates that they should only receive email based on subjects they have "opted-in" for. Once the data is separated from the application, and the end user is forced to take that data and find a new vendor, this feature may or may not be supported in the future solution. This could negatively impact the marketing program and the general happiness of the subscriber base. Even if the end user were astute enough to have procured a contingent license for the application in the event that the ASP goes out of business, the infrastructure required to support the ASP's application is typically excessive - and expensive - compared to a single organization's needs for supporting such a solution. By contrast, Licensed Solutions provide the marketer with a more traditional software acquisition model. A licensed solution shares the time to market advantage with the ASP solution; a typical implementation takes between five and 10 business days. However, unlike the ASP, the licensed solution requires maintenance for the marketer - keeping the application current and installing patches and upgrades as they are released. While typically more expensive at the outset than an ASP, the recurring costs over time are generally limited to the hosting and infrastructure costs of the licensed solution. To this point, many of today's licensed email marketing solutions are written to use extremely common web application servers (Microsoft IIS, Macromedia ColdFusion, IBM WebSphere, BEA WebLogic, Macromedia JRun) and database servers (Microsoft SQL Server, Oracle) - which often already exist as part of an organization's infrastructure powering the corporate or public web site. Even if the infrastructure is not there, it is frequently, inexpensively and readily available. As a result, many ASP solutions will wind up costing the same amount as a licensed solution by month 12. In addition, licensed solutions may provide the distinct advantage of providing an opportunity to integrate email marketing software with external systems like CRM or sales lead management. Integration of the licensed solution with a public web site can be of significant value, particularly if the solution provides an API; subscriber data can be automatically synchronized with these resources, minimizing the data management for the marketer, or even used as the basis for security or personalization in an extranet application. Lastly, a licensed application mitigates risk for the end user; even if the software vendor ceases operation or stops supporting the product, marketers can use the solution indefinitely until they find a suitable alternative, assuming they choose to replace it. When ASPs cease operations, it is not unusual for there to be less than 30 days notice, making it difficult to find an affordable replacement solution quickly as we observed in the above example. A licensed solution may very well provide the best bang for the buck - providing the most important advantages of custom development without the associated expenses and time, particularly if it can be easily integrated with existing systems.
Source:(Miller Systems) The chart above is an estimated appraisal of the different solutions outlined. The ASP solution assumes startup fees of roughly $5,000, with a recurring expense rate of about $2,500 quarterly. The Licensed Solution assumes roughly $10,000 in licensing and implementation costs at the outset, with a $1,000 quarterly charge for hosting the application, based on market rates for third party hosting solutions. The ongoing costs of infrastructure are the largest variable in the Licensed solution equation, since they may be anywhere from zero additional costs over a company's existing public web site, or significantly more money if a company procures hardware, software, and bandwidth for a dedicated solution. Ultimately, the right solution for your business depends on the sum of your requirements, budget, timetable, and risk tolerance.
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