ASPs Must Reach Out to Larger Companies

Small and mid-sized companies currently represent the majority of Application Service Provider (ASP) users, but by 2004, larger companies with more than 2,500 employees will account for 56 percent of the ASP market, according to a study from The Phillips Group.

“Our findings differ with forecasts from other research firms, which assume that the current situation will continue into the future,” said Terry White, a senior director of The Phillips Group and lead analyst for the study. “Our primary research found that larger businesses recognize the need to adopt a new business model, particularly in the area of e-commerce. This will impact their existing legacy applications, and because they lack the internal skills needed to make this transition, many will turn to ASPs.”

According to the research, 19 percent of large enterprises (those with 500 to 100,000 employees) currently use ASPs for internal applications, while 7 percent use ASPs for e-commerce applications. Internal applications are those that would primarily be used internally by employees of the business, such as messaging, data management, and internal business applications. On the other hand, e-commerce applications are primarily used by customers and suppliers of the business. By 2004, 65 percent of large corporations will use ASPs for internal applications, and 72 percent will use them for e-commerce applications, The Phillips Group predicts.

Currently, The Phillips Group found that 31 percent of small to medium-sized businesses use ASPs for internal applications, and 29 percent use them for e-commerce. Those number are predicted to rise to 44 percent for internal and 53 percent for e-commerce applications.

The awareness and eventual use of ASPs will rise if providers and their partners are more aggressive at marketing themselves. According to International Data Corp. (IDC), information regarding ASPs is only trickling into the market, and ASPs have a lot of work ahead of them to educate potential users.

“Awareness of ASPs is slowly penetrating the market,” said Clare Gillan, group VP of IDC’s Applications and Information Access research. “Although buyers are beginning to learn about ASPs, their degree of knowledge is very limited.”

Knowledge of ASPs is not only low, it varies across IT professionals and corporate officer buyers. In recent surveys by IDC, only 40 percent of IT professionals said they had at least heard the term ASP. This percentage rises to 50 percent among corporate executives. Approximately 36 percent of corporate executives said they would consider using an ASP, compared with only 22 percent of IT professionals. Additionally, corporate executives indicated higher current use of ASPs for almost all types of applications.

“Intuition favors business decision makers as ASP champions because they are generally more focused on time as a competitive factor and return on investment as a requirement,” Gillan said. “The message for ASPs is to focus marketing and sales efforts on the corporate executive community to whom the ASP value propositions speaks most clearly while including the IT professional who will most always influence the final decision.”

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