The age of the ASP is here, as companies try to cash in on the market for online application service providers. But is the demand really there, or are ASPs just a flash in the pan? Diane Palframan investigates.
A year ago, few businesses had encountered application service providers (ASPs), companies which provide remote access via the internet or a private network to the latest application software for a fixed fee. Now ASPs are hard to avoid. Some are well-known software vendors, others are unfamiliar start-ups. In the future, some large manufacturers are expected to join the fray by becoming ASPs for their suppliers.
All of them are after one thing: trying to cash in on what they predict to be a multi-billion dollar worldwide industry. In the UK, for example, two-thirds of businesses are likely to buy services from an ASP within the next 18 months, according to a recent survey commissioned by the ASP Industry Consortium, an international group formed to promote the industry.
ASPs believe that the services they are offering are an irresistible alternative to in-house systems, especially for small and medium-sized enterprises. They claim to deliver applications in days and cut the cost of IT ownership, allowing customers to concentrate on their core business.
User response, however, has been mixed. Exa Corporation, which decided at the end of last year to offer worldwide internet access to its computational fluid dynamics software for about $10 per CPU hour, says it is so pleased with the number of companies using the service that it is considering adding third-party analysis packages.
Exa is working with GTE Internetworking, which provided the networking architecture, and SGI, which provided a 32-bit server to deliver its application service. A spokeswoman for the company says that users are mainly attracted by the speed with which they can complete a simulation on the server.
By contrast, Fourth Shift Europe, which announced in March that it was offering a hosting service for its enterprise resource planning software for £6,000 per month for 35-40 active users, admits that it is disappointed by the industry’s lack of interest. `We had high expectations that SMEs would take up the offer because it eliminates their IT administrative overheads and gives higher uptime,’ says John Wolfenden, the company’s managing director.
At present, he is unsure whether the problem is price, or ERP software being perceived as too complex to be offered in this way. `Possibly it’s because ASP is seen as another fad,’ he adds.
There’s no doubt that the ASP industry is being oversold and is suffering from overpopulation. `More companies are getting into the business and it’s difficult for customers to decide which ASP is right for them,’ says Tim Pickard, director of market development at Esoft Global, a UK ASP.
The ASP Industry Consortium, of which he is vice-president, offers guidelines on choosing an ASP and service level agreements. The consortium is also working with the United Nations’ World Intellectual Property Organization to establish a globally-recognised dispute avoidance and settlement mechanism for the industry. Other user-oriented initiatives are planned.
JDe.sourcing, an ASP set up by enterprise software firm J D Edwards, believes many ASPs are targeting the wrong market. `It is a misconception that ASPs appeal to SMEs,’ insists Christian Fronteras, JDe.sourcing’s Europe, Middle-East and Africa business unit manager, `and we’re now trying to educate the market.’
JDe.sourcing is aiming its services at large companies even though they already have extensive IT infrastructures. Fronteras says many large companies have ERP systems that they fixed to take them into year 2000 which they now need to update. Rather than buying new systems that will have to be replaced in another five years, Fronteras believes many will opt for ASPs, even though he doubts whether they will make big savings.
JDe.sourcing’s first customer, announced in June, is lighting manufacturer LumiLeds, a joint venture between Agilent Technologies and Philips Lighting, which will be accessing J D Edwards’ financial, manufacturing, and distribution applications.
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