ITAA report lauds ASPs

A report released this week by the Information Technology Association of America shows that US businesses using application service providers are reaping real benefits and plan to continue using ASPs going forward.

The study, compiled from in-depth interviews with 14 ASP customers at the end of last year and early this year, found that cost savings are just one of the reasons businesses are using ASPs. Other benefits customers listed were:

-- The ability to focus on core business issues
-- Risk reduction, meaning that the ASP is there to handle problems during off-hours, providing more consistent uptime
-- Access to highly skilled IT staff
-- Availability of customized and complex software deployments

Since their inception several years ago, ASPs have been surrounded by hype. Initially, the thought was that every business would use hosted software and the market was forecast to grow exponentially. That didn't happen, and the hype turned negative. As ASPs folded and consolidated, the tide turned against the market, with the perception that ASPs were dead.

"With this report we're trying to say that the pendulum went from one ridiculous high to one ridiculous low," says Harris Miller, ITAA president. "We're doing a reality check, which is to say that the reality is somewhere in the middle."

Customers interviewed for the ITAA report spanned the gamut of big and small companies, Harris said, noting that all those who participated in the study planned to renew their contracts with their ASPs.

While the report concludes that the ASP market is here to stay, it also concedes that consolidation in the market is likely to continue. Hurdles to ASP adoption remain, including the reluctance of IT departments to relinquish control of applications and sunk costs already made in in-house software and infrastructure.

"The bottom line is the technology works, and it's a good way to do business," Miller says. "It may not be the solution for every problem, and it may not be the cup of tea for every company, but don't believe the stories you read about ASPs being dead. And don't believe the stories that ASPs don't deliver value, because that's not true either."

ASPs whose customers participated in the survey are Agilera, AppShop, BlueStar Solutions, Corio, ManagedOps, netASPx, USi and WTS.

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