IBM (NYSE:IBM) has been making some serious changes lately. It has, for example, invested significantly in Linux technologies, such as with an alliance with Novell (NASDAQ:NOVL). IBM has also shed its PC division.
And, yesterday, there was more evidence of critical change for IBM: the $182 million purchase of Corio (NASDAQ:CRIO). True, for a company as massive as IBM, $182 million isn't terribly significant. However, the transaction has a clear message: IBM believes that the future of software is the application service provider (ASP) model.
The traditional approach to software is to have a customer install software on its own network. In contrast, with the ASP model, the software is hosted by a technology provider. In effect, a customer uses software when it needs it. And as a result, there is no need to make big investments in hardware. From the customer's perspective, updates and maintenance are outsourced.
Companies like RightNow (NASDAQ:RNOW) and Salesforce.com (NYSE:CRM) have built thriving businesses on the ASP model. But Corio, founded in 1998, is one of the pioneers in this field.
Corio has a comprehensive portfolio of subscriptions for applications from companies such as Ariba (NASDAQ:ARBA), Concur, Epiphany, Oracle (NASDAQ:ORCL), SAP, and Siebel Systems. Moreover, the company has expertise with small- and medium-sized companies -- a market expected to experience strong growth.
Finally, IBM may also have another motive: to grab potential customers that are dissatisfied with Oracle's takeover of PeopleSoft. It could be yet another reason for customers to go ASP.
Fool contributor Tom Taulli does not own shares mentioned in this article.
