Growing numbers of application service providers (ASPs) are bringing their wares to market despite unpredictable take up levels of these new-style bureau services.
ASPs host applications off-site and charge users a monthly fee for access to the applications over a wide area network.
Gartner Group's John Roberts believes the development of e-business could create demand for the services.
As users expand business applications to encompass their supply chains, via the Web, a number of them will decide to have those applications hosted externally, Roberts predicted.
However, he said the small businesses market, which many ASPs are targeting, may not prove easy to crack.
While IT managers can see potential for renting applications by the month over the network in certain situations, they have reservations about doing so for strategic and customised applicationsGreg Brogan, IT services manager, Carlton United Breweries (CUB), said he did not discount the possibility of outsourcing applications to an ASP in the future, but that the decision would hinge on the implications for CUB's competitive advantage.
Brogan said that currently he viewed transactional applications as too strategic to outsource, because of their impact on CUB's supply chain.
Although he has not yet outsourced any applications at Victoria-based Hallmark Cards, Charles Birchall, IT manager of Hallmark, said he believes that ASP offerings are worth considering for "vanilla" applications.
Birchall believes that one of the benefits of renting applications from an ASP would be instant access to software enhancements, rather than having to go through on-site upgrades.
However, he has discounted the possibility for heavily customised applications such as Hallmark's JD Edwards software, explaining that running such a system off-site would be too complex. "We run JD Edwards with significant modifications . . . we are not a vanilla site."
Ellen Jenkins, senior technical manager, information and technology, Redland Shire Council, in Queensland, said she would be interested in looking at overall costs and benefits of the new services, to achieve sufficient connection speeds.
Jenkins said she saw potential for using such services in situations where short-term access to particular applications was required.
According to IDC figures, the number of organisations that outsource business application processing has not shown marked growth in recent years.
Peter Hind, manager of end-user research at IDC, said that, in 1995, 5.2 per cent of Australian organisations outsourced most or all of their business application processing. This figure rose to 7 per cent in 1995, and dropped to 6 per cent in 1999.