ASPs target small businesses for e-commerce

Small and medium-sized businesses are the main focus of attempts by application service providers (ASPs) to introduce their Internet-based applications outsourcing model to the market, according to the results from two studies released recently.

The ASP market will surpass $US22 billion by 2003, up from $889 million in 1998, Gartner Group's Dataquest unit said, announcing results from a recent survey. When asked to specify their primary end-user target for Web-based application offerings, 65 per cent of ASPs cited small and medium-sized businesses, according to the Dataquest survey.

Another survey confirming small businesses as the target of ASPs was conducted among executives attending Ambit International's internet ASP forum in San Francisco in August. The survey results were made public by Ambit and Lucent Technologies.

While business applications for Web-based services cover a number of application areas, there is concentration in a few key areas - e-commerce, business support services like CRM and ERP, information services/knowledge management, data storage, office automation and Web hosting.

Consumer applications are not as strongly represented in the current and future plans of surveyed ASPs. Nearly half of the respondents in the Ambit survey said they have no current or planned consumer applications. E-commerce - the number one application area for both consumers and businesses - has significantly less presence as a consumer offer (27 per cent) than it does for businesses (45 per cent).

Software developers for the ASP market also target these applications, but are distinguishable by directing their efforts toward supply chain management, internet telephony and design automation services, the Ambit survey concluded.

The top perceived challenges facing the ASP industry primarily involve security, reliability and bandwidth capacity of the network, survey respondents said. Additionally, the need for new revenue models and resistance from IT departments to outsource are also perceived as challenges.

Other challenges include low market awareness of the ASP model, the need for new sales channels, for better application development tools and overall industry cooperation, the Ambit survey results suggested.

Reflecting the immaturity of the ASP industry, the greatest immediate challenge offered by respondents was the need to develop a viable business model. Other concerns also reflect the start-up nature of the industry - financing, how to go to market and market education.

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