The Value and Impact of the ASP Model

There is no doubt that ASPs (Application Service Providers), slow at first to become part of the corporate landscape, are quickly gaining momentum as small and large businesses alike take advantage of ASP services. With more and larger companies turning to ASPs, Forrester projects that the market for application hosting will reach $11.3 billion in 2003, with a compound annual growth rate of 86 percent. This trend is fueled, in part, by two other major business trends: the Internet's pervasiveness in business, and the acceleration of the outsourcing trend.

In the broad sense, an ASP is a company that remotely hosts a software application and provides clients access to it over a network on a monthly rental or pay-as-you-go basis. The Internet, now integral to business, often functions as that network. As this delivery mechanism becomes faster and more accessible, the number of businesses investing in ASPs is growing rapidly.

As we enter the new millennium, the trend toward outsourcing also continues to skyrocket, with no end in sight. Worldwide, the most successful businesses have shifted from a do-it-yourself model that retained all functions in house to a "do what you do best, and outsource the rest" mentality. This same thinking is behind the ASP trend. Companies are realizing that ASP services can deliver the same benefits as outsourcing: cost control, improved core business focus, and access to additional capabilities and know-how without a major investment in infrastructure.

Through ASPs, companies also avoid the high up-front cost of packaged software licensing, reduce the need for in-house IT talent and decrease the implementation times on new software like never before, among other benefits.

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