ASPs in the Enterprise

So where do ASPs fit into the enterprise?

I’ve been thinking about Application Service Providers a lot since spending a few days at the Internet ASP Forum in Anaheim, Calif., this month.

There were dozens of excited vendors there. They ranged from the people providing classic ASP services, to people interested in selling back-end systems and services for ISVs wanting to get into the ASP business, to ISVs entering the ASP market. There was also a lot of confusion about who is doing what, who exactly is an ASP, and what services constitute an ASP.

The ASP model traces its roots to the outsourcing movement of the early 1990s. With the emergence of the Internet, lead industry observers predict the ASP model will have stronger legs than outsourcing did.

Right now the market is a speck in the IT spending universe. But some predict growth to tens of billions of dollars in the next three years.

The basic proposition of the ASP is compelling. Rent an application rather than buy it. Tired of paying up front for learning about, implementing, and supporting complex applications like SAP? Forget it. Rent that puppy.

But, as with everything, the devil is in the details. When dealing with an ASP, a whole raft of questions should be broached.

How dependable is the ASP? Service level agreements (SLAs) are a common element of ASP contracts. But many ASPs are start-ups. If the ASP doesn’t have the necessary support staff to handle problems, or is unresponsive, the SLA isn’t worth much. A related element is where the customer and the ASP draw the line on which part of the infrastructure each must manage. A lack of clear delineation can lead to finger pointing and extended downtime.

How seriously has the ASP taken security in the design of its infrastructure? This is always an issue when opening up business data to outside contractors of any stripe. One best practice in the industry is to demand third-party security audits before committing to any ASP solution.

Who owns the data generated by the application? This is an issue for businesses that may be interested in performing business analysis on data generated by the application that the ASP houses. Will you have to pay the ASP to access or extract the data for you? In a fast moving segment like this one, where players are bought, closed, or changing business models all the time, it’s important to ensure access to your own data should someone gobble up your ASP.

Another caveat is that while the renting model is good in theory, many ASP contracts are three-year deals. That’s a long time for an apartment lease, let alone to be locked into using software provided and supported by a third party.

Many of these same kinds of issues have led enterprise IT departments to retain their own development staffs to write applications internally and IT staffs to support and secure those applications. They’re the same reasons that lead a lot of IT departments to host Web servers internally rather than entrust them to an Internet service provider.

There’s no question that the broadest market for ASPs is the same one that packaged applications target -- small to midsized businesses.

Some industry enthusiasts believe the biggest value proposition for ASPs is when rentable applications become ubiquitous. An example would be renting Photoshop for a week to complete a specific project.

I suspect that such short-term application uses might be an entry point for the ASP in the enterprise. E-mail me at and let me know your views on the future of ASPs in the enterprise.