ASPs to flourish but industry experts emphasise caution

The global application service provider (ASP) market will soar to a value of $7.5bn by 2004, but this will still represent less than one per cent of total IT industry spend.

Clare Gillan, group vice president of applications and information access research at analyst IDC, predicted last week that the ASP market would enjoy a compound annual growth rate of 91 per cent.

Speaking at IDC's Directions 2000 conference in California, Gillan said much of the demand for such services will come from the professional services, insurance, telecoms and media sectors. Start-ups would be the early adopters, she said.

"Buying ASP services is not about reducing IT costs, but making applications more available to those that lag in IT adoption. Return on investment is the issue, not total cost of ownership," she said.

However, Gillan warned would-be ASPs to formulate their strategies around vertical industries and application types, and to set realistic goals because the market is relatively small.

Despite apparent demand for rentable applications, she does not believe the death of the software industry is imminent. Rather, she said, it is likely to double in size because the ASP market will represent a new sales channel for developers.

See also:

ASPs - the next big thing?

Everyone is talking about application service providers and how much money and staff resources they should be able to save customers. The new outsourcing model has yet to be taken up to any great extent, however. vnunet.comlooks at the phenomenon and tries to inject a note of reality into the hype.  30 Nov 2000

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