Gartner Foresees Growth in ASP Market

FRAMINGHAM (08/09/2000) - The worldwide application service provider (ASP) market will hit $25 billion by the end of 2004, but some early adopters and providers will be burned along the way, according to the Gartner Group.

The findings are based on a Dataquest Inc. ASP report and Gartner Group Inc. research.

"We see the beginning of what Gartner calls the 'Trough of Disillusionment' stage of the market," said Audrey Apfel, vice president and research director with Gartner. "What generally happens...is vendor consolidation, market restructuring, resegmentation and the renaming of the market."

There are currently 480 retail ASPs in the marketplace, according to Gartner.

By the end of 2001, Gartner predicts 60% of these ASPs will disappear as businesses fail, or are gobbled up by competitors.

Gartner believes the ASPs that survive will concentrate on delivering business services, rather than just applications. Some ASPs are already evolving into what Gartner is calling Business Service Providers (BSP) - companies that concentrate on the application-neutral delivery of services to clients.

"At the end of the day our clients are telling us it's about buying a business service - not a named application," Apfel said.

By year-end, Gartner forecasts the ASP market worldwide will be worth $3.5 billion, which represents 90% growth over the course of the year.

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