Definition for ASPs Emerging

FRAMINGHAM (04/24/2000) - A more refined concept of the role of application service providers (ASP) may crystallize this year, according to a study released last week by Cahners In-Stat Group in Scottsdale, Arizona.

In an effort to define the ASP model, the Cahners study, authored by analyst Kneko Burney, posed a series of questions to 100 ASPs. According to Burney, most respondents said they wanted to "do everything," from providing high-speed Internet access to hosting and managing applications for businesses. Many, she said, "are not focused at all."

"This is very reflective of the fact that the market [for ASPs] is evolving and emerging," Burney said. "Often, it's unclear what an ASP provides a customer."

But Burney and others see that situation changing as ASPs begin to form key partnerships and narrow their focus.

She noted that telecommunications carriers are getting into the act, with companies like AT&T Corp. and Sprint Corp. providing the network infrastructure for ASPs and forming co-marketing alliances with them.

According to the Cahners study, ASPs will spend up to $1 billion for internetworking infrastructure equipment this year.

This, Burney said, tells businesses that an ASP's applications are being served froma reliable network and that there's some technological muscle behind the ASP to resolve any reliability issues.

Burney said that in those cases, it's the carrier, not the ASP, that will end up owning the customer relationship.

Burney said she's seeing evidence that some ASPs are getting the idea that they can't be all things to all customers.

"They're beginning to specialize [in serving specific applications]," she said.

Gayle Howard, electronic-business applications director at Sprint in Dallas, said ASPs "have to have personnel that specialize by application" to be successful. And the requirements grow in proportion to the area served.

Annapolis, Maryland-based US-internetworking Inc. (USi) is betting that its 1,200 employees will keep it ahead of the pack. Internet Research Group in Los Altos, California, ranked USi as the top ASP by number of customers in a February study.

USi's customer list is a formidable one. It hosts applications for Knoll Pharmaceutical Co. in Mount Olive, New Jersey, Providian Financial Corp. in San Francisco and Hershey Foods Corp. in Hershey, Pennsylvania. Applications served from USi's data centers include those from Ariba Inc., Lawson Software, Microsoft Corp., Oracle Corp. and PeopleSoft Inc., said USi Senior Vice President Michele Perry.

USi is getting more company as more firms call themselves ASPs. Burney said there were roughly 70 ASPs last year and more than 100 by the end of the first quarter.

"Everyone but my mother is calling themselves an ASP, and now she's thinking about it," Perry said. "A true application service provider should be able to deliver the hardware, application software, network infrastructure and take full responsibility for a monthly fee."

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