ASPs Gaining Awareness, Following Dot-Com Path

Positive increases in the awareness of the application service provider (ASP) model and indications of more companies moving toward its adoption sum up the results of the Software & Information Industry Association (SIIA) study on ASPs.

The survey found that 84 percent of IT managers are familiar with the workings of the ASP model, and a full three-quarters are considering using an ASP in conjunction with future software implementation. Twenty-four percent of respondents indicated their company is currently running at least one ASP-enabled application, and 40 percent are planning to do so in the next 12 months.

“Corporate IT managers are the gatekeepers controlling the future of the ASP model,” said Ken Wasch, SIIA president. “This survey clearly shows that the benefits of the model are beginning to resonate, while at the same time the challenges the industry must address before we can expect mass market adoption are becoming more apparent.”

The respondents identified the reliability/reputation of the ASP as the leading selection criteria for choosing an ASP (31 percent); followed by Service Level Agreement, or guaranteed connection rate (29 percent); and security (26 percent). Challenges identified by respondents include the hosting of data at an outside facility, identified by 63 percent as deterrent to using an ASP. Seventy percent indicated a greater willingness to use the model if data were hosted internally.

Benefits identified by IT managers include: ease of license management; reduced total cost of ownership; ease of upgrade/management; increased access for remote users; and better data management.

The SIIA survey was conducted Oct. 16 to Nov. 1. The majority of the respondents serve as software managers for companies spending more than $1 million annually on IT products and services for more than 500 users.

A report by Zona Research, which is based on a detailed survey of 137 respondents from enterprises currently using or planning to adopt and deploy ASP services within the year, found 62 percent of the current ASP users have implemented from two to six ASP applications. Thirty-one percent of current ASP users report more than half their computing devices are accessing ASP applications. More than half (56 percent) of the organizations not planning to use ASPs believe they have sufficient IT resources to run applications in-house.

As for the ASPs themselves, eMarketer’s ASP report has found similarities between the early stages of the ASP industry and the early nascent stages of the B2B e-commerce market. Just as start-up B2B exchanges were brushed aside in some industries by the consortia-led exchanges of brick-and-mortar incumbents, eMarketer feels start-up ASPs run the risk of being displaced by major software vendors and IT consulting firms who are successfully moving forward with their own models.

eMarketer also found that much of the advice being offered to ASP players is repackaged version of the guidance provided to dot-coms. Nascent ASPs are being counseled to spend on establishing brand recognition and building strategic business partnerships.

“Although branding and relationship building are crucial elements for success as an ASP, the over-emphasis upon these elements of business strategy follows the same pattern of boom and bust that we saw in the B2C and B2B space,” said Steve Butler, senior business analyst at eMarketer. “The most practical advice that can be given to ASPs is to mobilize a proactive sales force that not only educates customers about the ASP concept, but also shows potential clients how the ASP will improve their company’s bottom line.”

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