 The ASP Phenomenon
First Published: March 2000
Last Update: April 2002
Author: Computer Partners
What is an ASP?
ASP stands for Application Service Provider. This is a method of
software or application distribution over the Internet. The person or business
using the software pays a rental or per transaction fee.
What are the advantages of the ASP model?
The ASP model of software delivery allows small to medium sized
businesses access to sophisticated, full featured and tightly integrated
programs such as Retail Point-Of-Sale and Enterprise Resource Planning systems
that would normally be cost prohibitive for companies of their size to purchase.
Off-site, Internet computing allows small and mid-sized business
(10-1,000 employees) subscribers to minimize hardware/software upgrade cycles.
It also enables them to precisely control total cost of technology ownership and
to focus on their core businesses.
In addition there is a distinct tax advantage in that their
entire IT cost can be expensed rather than written off over time. The other
obvious advantage is the avoidance of the large upfront costs associated with
purchasing an in-house IT system.
Who are the players ?
The players represent the who's who of the hardware, software
and Internet companies. The list includes name like IBM, Oracle, Microsoft,
FutureLink and Qwest to mention just a few.
One of the early entries into this market is Progress
Software Corporation with their ASPEN
program. In a Nov. 1, 1999 press release they said in part: "Progress
Software Corporation (NASDAQ: PRGS), a leading supplier of application
development, deployment and management products and services, today announced
that its ASPENTM Program now represents the largest global force in the
expanding ASP market. The ASPEN Program enables independent software vendors
(ISVs) to readily take advantage of the rapidly-growing Application Service
Provider (ASP) distribution model.
To date, Progress Software has assisted in bringing to market
applications from 27 of its ISVs around the world. These new ASPs now represent
a global portfolio of 38 applications, and already have 2,400 end-users in
nearly 80 different organizations.
Progress Software also announced that its ASPEN Program now
boasts more than 50 partners worldwide, representing the largest network of ASPs
and ISVs in the industry. Through the ASPEN Program, the company provides its
ISV partners with ASP technology, services and-as the foremost ASP
"matchmaker"-partnerships with the industry's largest network of ASP
related infrastructure providers.
Since the inception of the ASPEN Program in May, 1999, Progress
Software has established strategic partnerships with such leaders in the ASP
space as USinternetworking, NaviSite, FutureLink and ESOFT Global to speed the
hosting of its ISVs' applications.
This network of outhosting partners provides Progress Software
ISVs with key benefits-pre-trained staff, installed Progress® and WebSpeed®
technology, solid networking and bandwidth, application security, wide
geographic coverage, 24x7 technical support and management that erase market
entry barriers and allow them to rapidly migrate to the ASP business model.
What is the size of the market?
On Mar 31st 1999 the first report to formally size the high-end
application service provider (ASP) market projects it will reach $2bn worldwide
by 2003, rising an average 91% annually.
Leading research and analysis company IDC's new bulletin,
Worldwide Application Service Provider Forecast, 1998-2003, sizes the market at
$150.4m this year, counting only those ASPs who provide advanced services and
complex applications such as enterprise resource planning (ERP) software.
Companies who merely host and maintain simple applications are
excluded. The report says that various factors will drive the market, but that
ASPs must work to overcome customer concerns by building successful long-term
references.
GartnerGroup's October 1999 release on the application hosting
market projects the growth of worldwide ASP services revenue to grow from $889
million in 1998 to $22.7 billion in 2003.
Does the ASP model work?
The Hurwitz Group reported in a recent article that despite its
short history, the ASP movement has already experienced more than its fair share
of both hype and scepticism.
It remains somewhat of an understatement to observe that vendor
activity in the ASP segment remains far ahead of demonstrable customer demand.
But the real story about the ASP movement is to be told by those that have
actually experienced it. That is, customers who have procured services from
ASPs.
The under-reported truth about these customers is that they like
the ASP model a lot, and for many of them it fits their own business model like
a glove.
Hurwitz Group interviewed many of these customers and found that
their experiences have been highly positive, and their conviction about the
appropriateness of the ASP model remains unshakeable. Many of them are
mid-market customers, widely cited as the "sweet spot" for ASP
offerings. But their size in terms of revenues or employees tells only part of
the story.
To date, demand for ASP services has been strongest among
emerging enterprises, including recent startups, "dot.coms," and
spin-offs from emerging "brick and mortar" companies. For the most
part, these enterprises are seeking an alternative to traditional implementation
cycles and prefer the ASP approach because they require rapid time-to-market,
careful husbandry of available management and personnel resources, and focus on
rapid growth and scalability.
The ASP phenomenon is upon us. It threatens to radically change
the existing software distribution paradigm. The benefits are many, with few
obvious downsides. Should your business be considering an ASP application?
Here are some ASP links you may find useful.
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