Report says 2001 to be turning point for ASPs

This year will be a turning point for application service providers as they rethink their business models and battle to be among the survivors in the fast-growing market, research firm IDC says in a new report.

"We're at the point where ASPs really need to differentiate themselves by offering additional types of services," analyst Amy Mizoras says. She expects ASPs to try differentiating themselves by devoting more resources to customer service and to turn on new services in areas such as security and storage.

In its report, IDC says companies this year also can expect a slew of ASPs that will design software specifically for the Web, rather than retooling packaged software for hosted delivery.

Overall, IDC agrees with other analysts who expect a big shakeout in 2001 as the hype around the ASP model dissipates, and companies get down to business.

"Without a doubt, ASPs are in for an interesting ride in 2001. For some, the worst is just around the corner, as they fail to successfully execute the model. However, it will be a billion-dollar market in 2001, and for ASPs that understand the market and play wisely, the best is yet to come," IDC analyst Jessica Goepfert says.