The content management space has followed a predictable trajectory as far as enterprise software is concerned.

Several early market entrants grew to take a large share of the market, only to see that market invaded by newcomers, followed by the inevitable shakeout and consolidation.

Today, the enterprise software market is buffeted by yet another force: the re-emergence of the application service provider, or ASP, a business that was almost wiped out by the popping of the Internet bubble over the past few years.

In a nutshell, an ASP is a company that hosts software on its own servers and its own facilities. Customers rent the use of applications and access them over the Internet or dedicated link.

The ASP has all the responsibilities of buying, upgrading and maintaining the software.

ASP customers get all the capabilities of the app without installation, maintenance or other operational headaches. Not a bad proposition.

Straightforward

The business justification of the ASP model is straightforward and would be recognizable even to business thinkers from a century ago.

At its most basic, the ASP model plays on the fundamental tension between core and non-core business functions. Most businesses are very good at only a small handful of business functions. This group of functions is the “core business” and anything not related directly to it may be a good candidate for outsourcing to another company.

To take a business school approach to the question, let’s examine a turn-of-the-century newspaper publisher as an example. What is the publisher’s core business? Early newspaper publishers saw their core business as creating a newspaper.

In this context it made sense for the publisher to build and maintain a printing press and perhaps even have a hand in creating the raw materials (paper and ink).

No one would expect the publisher to own the forest or lumber mills that are instrumental in turning trees to paper - both are too far removed from the core business, thus each is outsourced.

Content focus

Eventually, some publishers realized that they weren’t really in the business of creating newspapers after all.

Instead, they were in the business of creating content. And so they focused on that core business, building impressive news staffs and editorial services and beginning to outsource the non-core parts of their operations, such as delivery.

Today, some newspapers are beginning to realize they aren’t in the content business either. Rather, they are in the business of aggregating local audiences to sell to local advertisers. So they outsource the non-core functions of printing (to independent printers) and even much of the content creation (to content syndicators like The Associated Press and Reuters) and focus efforts on the core business of selling newspaper ads.

ASPs look for similar dynamics in the markets they serve. When does an industry’s business shift to the point where certain IT functions aren’t considered core?

Lots of attention

Between 1998 and 2000 ASPs attracted a lot of attention. Their proposed benefits were compelling: dramatically lower total cost of ownership; a single monthly fee that encompassed hardware, software, maintenance and service. Venture money poured into start-ups pursuing the ASP model.

Then the bottom dropped out.

As the capital markets collapsed, ASPs that had not yet achieved enough momentum to support operations independent of their venture capital lifeline disappeared overnight.

For customers of many ASPs, the unthinkable happened as mission-critical data was wiped out or locked up during lengthy bankruptcy proceedings.

Customers didn’t know what to do. I know one chief executive officer who flew to San Francisco, marched up to the (mostly empty) offices of an ASP where much of his company’s billing information was stored and didn’t leave until he had the data he needed on a floppy disk in his briefcase.

Bad word?

In the blink of an eye, “ASP” became a bad word, virtually synonymous with the over-exuberance of the dot-com era.

But even a basic analysis of the economics underlying the software industry revealed to a lot of people that the ASP model itself is quite sound. Thus, experimentation has gone on quietly in the last few years.

That experimentation yielded myriad results.

Among the first was renaming the concept. While central tenets of the model persisted, the “ASP” name itself was dropped like a hot potato. Instead, terms such as “hosted software,” “MSP,” or managed service provider and “software-as-a-service” emerged.

All of these terms really mean the same thing, of course: that someone else besides the end-user (or company) is responsible for maintaining the infrastructure required to deliver the software.

What’s core?

Of all the categories of enterprise software hosted by ASPs, Web content management software is among the best-suited.

Why? In most industries, Web content management is not considered a core capability. Even traditional media companies describe their online activities as creating content, not creating a Web site.

As such, with Web content management, hosted solutions are simply the most efficient and elegant way to outsource the function.

Hosted Web content management software usually looks no different to the end-user (the every day site administrator or editor, for instance) than an installed application.

Many applications in the enterprise today have Web browser (or browser-like) interfaces and due to the efficiencies of the Internet, it doesn’t really matter to the user whether the program driving that interface is next door or across the country.

In some ways, then, the “hosted vs. installed” question is more semantic than anything. As one chief technical officer put it: “In the end, all enterprise software is hosted. The only question is who is doing the hosting.”

Less cost, more quality

There are two primary ways that hosted content management apps are deployed in the enterprise today: as a platform supporting the entire Web content management infrastructure or as a complement to an existing content management offering.

The benefits of using a hosted app to support a platform are what you might expect from an ASP. Because maintaining a sophisticated content management app is the ASP’s core business, you can expect higher quality service than an equivalent app hosted internally.

Second, hosted apps cost less than what it would cost to support an application in-house. Instead of paying upwards of $200,000 to install and administer an enterprise-class Web content management app in-house, users can rent the app for much less.

It’s possible for a user to access all the benefits of scalable, robust software while paying for only a fraction of the app’s full retail costs.

For users with Web content management software already in place, ASPs can be tapped to complement existing infrastructure.

For example, many Web content management apps lack the ability to support e-mail newsletters. That function can be accomplished by using an ASP.

Utility model

Even the big software developers are beginning to share a vision of a world where software looks more like a utility and less like a locally installed and managed application.

 Over the long term, users will treat applications the way they treat electricity or (perhaps more aptly) pay television: Simply plug the wire into the wall and pay for what you use.

Companies such as Microsoft, Intuit and IBM have begun to experiment with this kind of software delivery, in part due to the success of upstart ASP companies.

Thus far, these battles have centered around sales force automation and customer relationship management apps. But content management apps might be the next battleground.