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ASP Implementation Guide

Get up to speed on application service providers and discover how to capture the hot trend's promise and avoid the pitfalls.

By Lauren Gibbons Paul
Network World, 01/22/01

Technology Insider It hasn't been the easiest year for application service providers. Sure, the software delivery model is one of the most hyped topics around. Yet buzz doesn't translate into business, and most IT executives still don't exactly understand what ASPs are.

That's no wonder, because not even the term is standard. Some market research firms and vendors define ASP as application service provisioning instead. Whichever way you spell out the acronym, ASP generally refers to the delivery of software and related services across a network to multiple customers on a pay-as-you-go basis.

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Even that basic definition isn't safe. The Information Technology Association of America (ITAA) has expanded its ASP definition: "Any 'for profit' company that provides aggregated information technology resources to clients remotely via the Internet or other networked arrangement."

This designation includes a new breed of ASPs called managed service providers that offer security, storage and a host of other services that do not necessarily consist of packaged applications. The ASP model is evolving into a "software as service" paradigm based on network solutions and online business services, according to Rita Terdiman, a Gartner Group analyst.

The benefits of using an ASP are clear: Going with a hosted service gives companies access to high-end applications, such as enterprise resource planning or customer relationship management, with little upfront investment. ASPs offer quicker time to implementation at a guaranteed performance level, and can help companies suffering from a shortage of IT staff.

However, the ASP model carries some drawbacks. Chief among these is the need to forgo application customization. In order to survive, ASPs must cultivate a "one-to-many" delivery model in which they host basically the same application for a number of customers. The prospect of integrating the ASP offering with existing in-house applications is another chief user concern, according to the ITAA ASP Customer Demand survey.

Surprisingly, the folks who are deploying ASPs aren't the ones who stand to benefit the most from the technology trend. "Large companies have been the biggest proponents of the ASP model so far, even though the value proposition speaks mostly to small and medium-sized businesses," says Amy Mizouras, senior analyst for IDC. Large companies are using ASPs mostly for non-mission-critical applications they're happy to offload from their own beleaguered IT departments.

In a big shift from last year at this time, most potential ASP customers are no longer interested in renting the software. "They're buying the software licenses directly from the vendor and then having the ASP host the application. They want to be able to own the software outright if the ASP does go away," Mizouras says. The specter of industry consolidation is there, but as you'll read, many ASP customers are happy with the choice they made.