Editor’s Note: Is there an inherent flaw in the hosted-service business model? The Bulletin, a weekly publication of Seybold Publications, published an article last week which examined the recent failures of MyFujiFilm.com and Adobe Design Team. Both offerings were to provide online collaboration for print and publishing firms. Adobe Design Team will reportedly shut down early next year and MyFujiFilm.com will close its offices at the end of November. In this article, Luke Cavanagh - Editor of The Bulletin, discusses the business models of these two companies. The article also offers an insider’s perspective from Shellie Hall, a marketing manager with MyFujiFilm.com. We would like to thank Seybold Publications and Luke Cavanagh for allowing us to present this article to our members. Service Offerings' Failures Are Due to a Lack of Execution: MyFujiFilm & Adobe by Luke Cavanagh Last week marked the closing of high-profile ASP offerings from two major graphic arts vendors, offering further evidence that a market once considered a gold mine now looks like a barren wasteland. Adobe Design Team is no longer accepting new subscribers and will operate only until January 2003 and then be shut down, and MyFujiFilm.com will close its Hanover Park, IL, offices November 30, in the process cutting eight employees and five full-time consultants. At their start, each service intended to provide online, shared workspaces for professional publishing organizations and met their respective ends amidst substantially less fanfare than that with which they entered the market. The closings no doubt will call into question the viability of the hosted-service model. Two offerings, one failure. Though they shared a common service vision, Fuji's and Adobe's target markets differed significantly. Design Team users---intended to be small graphic arts shops and corporate marketing groups---could get 100 MB of online storage and certain project-management features for $39.95 a month. Fuji had hoped to land monthly fees of between $1,000 and $2,000 from printers, who would buy access to the service and make it available to customers. Both cited a shortage of paid customers as the primary reason for scrapping the projects. While Fuji had as many as 50 printers running free trials at one time, as far as we know the company landed just one paid contract for the service. While Adobe has declined to offer subscriber numbers, one can only assume that uptake was dismal given that the project was scrapped less than a year after it was launched in late November 2001. While many niche online collaboration offerings remain available on the market and one, eRoom, had enough of a market to command $120 million from Documentum last month, clearly Adobe and Fuji did not find the mass market they had sought. The travails of print-focused ASPs such as PrintCafe, PrintChannel, Collabria, Noosh and Sprockets have been well documented in these pages and across the industry after a mad rush in 2000, with most blaming a faltering United States economy for their troubles. In reality, though, it could be that execution was a bigger stumbling block than people think. An insider's view. Shellie Hall is a marketing manager with MyFujiFilm.com and, prior to that, spent time with Sprockets before its collapse a year ago. Part of what she sees as a culprit in each case of failure is that the reality of the services that came to market did not match their much-hyped releases. "Our original product demo with Sprockets was so different than what actually went out to customers that people wondered where everything was when they finally got it," said Hall. "(CEO) Patrick White's vision for the thing was incredible, but the development never got up to speed with the vision." MyFujiFilm.com was in a similar boat at a much-ballyhooed launch at the massive Drupa show in 2000. The service was to be a comprehensive workflow and commerce suite for printers (back when "commerce" was a cool word), encompassing everything but the ultimate buyer-printer transaction. A year later, the service had still not come to market and was being built into something that barely resembled the original vision. It ended up being a suite of technology licensed from other vendors---among them Markzware, Group Logic, and Engage---and thrown together into a service offering. A redesign of Design Team's interface delayed its launch for about a year. Even after the significant delay, performance issues and a relatively anemic feature set overshadowed the service's positives. Design Team was another case of a service failing to live up to its intended vision. Hall also cited MyFujiFilm's lack of JDF and XML support as factors that hampered its success, as well as the sales model in general. "The idea was for printers to push MyFujiFilm.com onto their customers and make it a market standard for handling print jobs," said Hall. "But printers don't drive technology, technology drives printers. If everyone, for example, decides they're going to use InDesign, the printers will then support InDesign, not the other way around." We note that a similar fate, in fact, befell Macromedia SiteSpring, a low-cost (around $2,000) installed collaborative solution for the production of Web sites. Though the price tag was attractive, the feature set was not enough for the broad market, and as a result Macromedia canned development earlier this year. Still a flawed model? "I don't think the market for ASP collaboration solutions is ever going to take off," said Hall. "There are too many vendors out there that can make their installed software available to distributed users." Perhaps she is right, but we don't think the present evidence proves it. Sprockets, MyFujiFilm.com and Adobe Design Team failed because they didn't deliver on their promises--a fatal error with any business model. Contrast that with eRoom, a hosted solution that has attracted thousands of users; it commanded a huge price tag on the open market and continues to find success where these others have failed. The many failures that followed the dot-com boom burned a lot of users and will make it harder for future start-ups to sell hosted services. But we do not think there is an inherent flaw in the hosted-service business model, provided that the business lives up to its claims and offers a high-quality service that the market needs.