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RSS feedsMany application service providers (ASPs) will fail or be merged into partnerships by the end of the year.
A report by researcher IDC claims that ASPs, which rent remotely-hosted applications to end-users, have failed to provide the right combination of applications, services and infrastructure, making it impossible for any company to dominate the market.
Vendors surviving the market consolidation will split into two groups, says IDC senior analyst Jessica Goepfert.
"Large complex enterprise applications will be delivered by bigger players such as EDS and SAP. Smaller ones will deliver less complex applications and focus on the lower end," she said.
Goepfert says the number of vendors will shrink dramatically over the next 12 months.
"Most of the consolidation will happen at the lower end where there are hundreds of small players with no market recognition and rudimentary software offerings. Companies which price low and rely on volume to be profitable are especially at risk.
"ASPs are on the brink of becoming mainstream. The traditional big players with the known brand names are well-placed to dominate the market, though we haven't seen that yet," she said.
EDS director of business solutions Carol Wyatt says ASP earnings will claim an increasing percentage of revenue by 2005. And the company has yet to turn its full attention to the sector.
"We have a long history of providing managed and outsourced services. But customers aren't ready to receive all their applications from an ASP yet, and we won't extend our offering until the model becomes more accepted," she said.
See also:
All Applications
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