A Fork in the Road for ASPs | Article

outsourcing worldwide; ASPs are on timeWhat is an Application Service Provider (ASP)? The answer is constantly evolving. Today, that ubiquitous term has come to describe two distinct ways of doing business. And that fork in the road points in the direction of the future for this fast growing area of outsourcing.

Some companies are ASPs in the historical sense. They are time-share providers willing to host any application on their computers. These applications are typically Unix or Microsoft-based.

Software publishers also are rushing to provide their services through this channel. Their buyers find this service attractive because they don’t want to do it themselves.

Unfortunately, this business arrangement didn’t work well in the 1970’s. I anticipate the same fate for time-sharing today. I predict this kind of arrangements will fade because they just don’t provide enough value to the customer.

But I believe the second type of ASP will blossom and flourish and indeed become the dominant life form. These ASPS will become experts in their chosen application, garnering specific product knowledge that they can share with their customers. I’m betting on this business model because it provides higher quality service at a lower cost to the buyer.

Furthermore, I believe ASPs will expand their reach beyond the human resources and Enterprise Resource Planning (ERP) arenas. Right now ASP firms like Corio and e-online provide access to sophisticated (and expensive) software for large companies. Currently, this is a well-defined market.

Expanding Into New Markets

In my crystal ball, ASPs will encompass all kinds of software. That’s because the value of an ASP is not limited to any one area. ASPs can help anyone get a difficult application up and running faster than they can by doing it in house. And an ASP can keep the programs running at a lower cost. Moreover, their highly trained staff can offer a high quality of service.

New ASP uses include facility management software that assists utilities in managing their diverse assets. For a telephone company, that would include telephone poles and relay stations. Smaller utilities that can’t afford the sophisticated infrastructure to run and support this software are eagerly turning to ASPs.

Another new area is health care claims processing. Software automating the process can track a claim throughout the process and monitor the exceptions in addition to reducing the time it takes to handle a claim for a consumer.

The ASPs of tomorrow will have to address the cost factor, though. At this point in time many software publishers have not been willing to provide a meaningful discount to ASPs who purchase their software. I predict this will happen.

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