APPLICATION SERVICE PROVIDER (ASP)

An application service provider (ASP) is a company that delivers and manages software applications and computer services from a remote data center to multiple users. Companies typically access these applications and services over the Internet, through a virtual private network (VPN), or through dedicated lease lines. A wide range of both applications and communications and infrastructure capabilities are available from ASPs. Among the most commonly used are enterprise applications, including enterprise resource planning (ERP), customer relationship management (CRM), supply management, human resources, and financial management. Software companies such as Microsoft Corp. and Corel Corp. are developing ASP versions of their productivity applications. When it comes to information technology (IT) and network infrastructure, ASPs can deliver network services, complex mission-critical hosting, software and hardware provisioning, infrastructure integration and support services, business continuity services, network management and administration services, and managed VPNs. ASPs also deliver network-based access to processing power and remote data storage facilities.

ASPs have evolved from simply hosting Web services to building and managing e-commerce and platforms. They handle e-commerce issues such as security, registration, and payments, and also provide Internet-based technologies. ASPs can provide communications platforms for messaging, voicemail, IP fax, and hosted collaboration platforms, as well as portals that offer such services as free Web e-mail, contact management, and calendaring.

By hosting these services for other businesses, ASPs enable smaller businesses to benefit from high-priced software packages and systems without having to purchase them. Larger companies tend to use ASPs for outsourcing, while smaller businesses with low budgets use them to gain access to high-end enterprise computing that would be too expensive to purchase. Whatever the size of the client company, using ASPs allows businesses to focus their resources on their core competencies rather than on their information systems (IS) and information technology.

ASPs offer several benefits to both small and large companies. These include a quick launch for new e-commerce, supply chain, and CRM applications. Client companies have to spend less on buying, maintaining, and upgrading software and hardware to run basic applications. They also are free from the need to devote personnel and other resources to keeping up with rapid technological change. ASPs not only provide seamless and inexpensive upgrades, they apply their experience to the best IT practices in order to achieve high levels of availability, security, backup, disaster recovery, and shadowing. ASPs also allow for easy upscaling and downscaling as business volumes change. Finally, ASPs—which typically operate on one-to-three-year contracts with service level agreements (SLAs)—provide predictable costs to client companies. With an ASP, payments are amortized over time so companies don't have to make large capital expenditures on software and hardware.

Of course, there are tradeoffs when using an ASP. Among the factors to consider are the loss of hands-on control, the lack of a software license, and a contractual commitment lasting from one to three years. Successful ASPs must deliver on application reliability and availability. A survey by information technology industry magazine CIO found that guaranteed reliability and availability was the number one factor in evaluating ASPs. The second-most-important factor was faster implementation than could be achieved in-house. Another important factor in deciding whether or not to use an ASP was the ability to avoid IS staffing problems. Being free from having to devote resources to hiring and training IS employees was rated as a significant benefit in deciding whether to outsource applications to an ASP.

GROWING MARKET FOR ASPS

According to the Gartner Group, companies spent $2.7 billion on ASPs in 2000. That figure is expected to increase to anywhere from $16 billion to $22.7 billion by 2003. Application hosting has been driven by several converging technologies including the growth of the Internet, which permitted the linking of computers to a mostly IP standards-based server network; access to larger amounts of communications bandwidth, which made it easier to reliably send and retrieve large amounts of complex data; and a widely embraced user interface in the form of Web browsers.

The ASP Industry Consortium was formed in May 1999 by 25 leading technology companies. Founding companies included AT&T Corp., Cisco Systems Inc., Compaq Computer Corp., GTE Corp., IBM Corp., Sun Microsystems Inc., and UUNET Technologies. The consortium has grown to more than 700 companies and includes ASP companies, software and hardware companies, network service providers, ISPs, and others.

According to the ASP Industry Consortium, there were some 300 ASPs in business at the end of 2000, and that number has grown considerably. In addition to calling themselves ASPs, some also were known as managed (or management) service providers (MSPs), network service providers (NSPs), netsourcers, total service providers (TSPs), and software rental companies. A full-service provider (FSP)—also known as a total service provider—is an ASP that offers a wide range of Web-based information technology services, such as planning and creating a Web presence, software applications, and Web hosting and maintenance. Business service providers (BSPs) are similar to ASPs in that they provide customers with application packages over networks. However, BSPs differ from ASPs in that they tend to tailor software packages to a customer's needs and offer back-office solutions for processes like payroll and bookkeeping. A management service provider (MSP) provides the personnel to manage and administer IT services for other companies, thus saving clients the need to have their own administrative personnel.

FURTHER READING:

ASP Industry Consortium. "Glossary." June 6, 2001. Available from www.aspindustry.org.

"ASPs: Setting Off a Sea of Change." CIO. October 1, 2000.

Bolding, Jeb. "ASP Adoption Malaise." NetworkWorldFusion. February 21, 2001. Available from www.nwfusion.com

"Compelling Numbers Point to Accelerating ASP Use." CIO. October 1, 2000.

Cooper, Cathy. "Global ASP Deal Is Sealed." Computer Weekly. May 11, 2000.

Semilof, Margie. "ASP Group Boosts Its Membership." Computer Reseller News. July 5, 1999.

"The Value of Opting for an ASP." CIO. October 1, 2000.

SEE ALSO: Hosting Services; Internet Service Provider (ISP); Management Service Provider (MSP); Scalability; Software

Application Service Providers

According to the Information Technology Association of America, an application service provider (ASP) is "a company that provides a collection of IT resources to clients or subscribers who access those resources via the Internet or other networking arrangements." With the many challenges that businesses face every day, the last thing they need to worry about are a lot of technological issues that are beyond their area of expertise. Many businesses that run their own applications are forced to increase their staffs to include information technology experts who maintain and upgrade application software. Over time, this can become an expensive endeavor.

Many businesses are deciding to outsource the management of the applications to an application service provider. While cost is usually the main reason for a company to enlist the help of an ASP, other benefits include saving time, gaining access to top-tier software, and providing scalability. The speed at which advances are made in the field of computerization means that a significant investment must be made to remain knowledgeable and informed about the newest applications in the field. The cost benefit assessment of this investment for a single user is often not favorable. Quite simply, an ASP allows managers the opportunity to do what they do best and invest in acquiring knowledge about their own industry and not the computer systems industry.

An application service provider can handle many aspects of a business. ASPs manage and deliver application capabilities to multiple entities from a single data center across the private or public Internet on a rental basis. Typical of the sorts of hosted applications that ASPs offer include: enterprise resource planning applications (human resources, financials, manufacturing, supply chain management); e-commerce applications; customer relationship management packages, (sales automation, customer services and other front-office applications); productivity applications (collaboration, workflow management, project management office); and e-mail and messaging services.

Some businesses have concerns about using ASPs. Security and reliability are just two of the issues that have made businesses reluctant to turn over full control of their applications to an outside source. The ASP industry as a whole is working diligently to address these concerns and prove that their services are valid and cost efficient. Overall, their efforts appear to be successful. As Samuel Greengard stated in Workforce: "Where there was once fear and distrust, there's now growing acceptance of the idea that outside companies can manage hardware, software, and telecommunications remotely. And, make no mistake, these so-called application service providers are forever changing the way companies view technology and how they use it to gain a competitive advantage."

Before entering into a formal relationship with an application service provider, businesses should make sure they fully understand the service level agreement (SLA). The SLA is a document that protects the interests of both the business and the ASP, and usually guarantees performance levels in areas such as uptime, bandwidth, and interapplication communication. By taking the time to understand the SLA up front, a business cuts down on the number of potential problems and headaches later.

Small businesses are one sector that stands to benefit from the expertise of an application service provider. It is a quick and affordable way to acquire the necessary applications to run a successful business, especially if the business is a dot-com startup with no in-house staff or technology. Still, a small business (or any business, for that matter) should always make sure that the ASP is specific to their industry, offers a full line of business applications, is able to scale as the business grows, and can manage custom applications and solutions that are unique to the company. The ability of the ASP to integrate with the company's customers, suppliers, and partners can also be a crucial element in the business relationship.

BIBLIOGRAPHY

Bansal, Parveen. "Grasping ASPs." The Banker. March 2001.

Borck, James R. "Enterprise Strategies: Customers Really Can Find Happiness with the Application Service Provider Model." InfoWorld. 11 December 2000.

Cameron, Preston. "Slaying the Competition Dragon: Selecting an Application Service Provider." CMA Management. March 2001.

Greengard, Samuel. "Handing Off Your HRMS: What You Need to Know." Workforce. February 2001.

Grevstad, Eric. "ASP Versus PC." Home Office Computing. March 2001.

Jossi, Frank. "ASP Trend Hits Home." Minneapolis-St. Paul City Business. 8 December 2000.

Lee, Mie-Yun. "Choose or Lose." Entrepreneur. December 2000.

Paul, Lauren Gibbons. "The ASP Dilemma." Electronic Business. January 2001.

Shutovich, Christina A. "ASP Model Can Reduce Short- and Long-Term Costs." Aftermarket Business. March 2001.

Umar, Amjad, and Paula Lynn Parks. "Satisfy Stockholders." e-Business and Distributed Systems Handbook: Applications Module. Business & Economics, 2003.

                              Hillstrom, Northern Lights

                               updated by Magee, ECDI

application service provider A company which not only offers the facilities of an INTERNET SERVICE PROVIDER, but also services such as WEB DESIGN, WEB SITE PROMOTION, and accounting. Such a company is usually the first stop for a conventional company that wishes to enter the field of ECOMMERCE.