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E-business Watch
Tracking the
online media to bring you the key e-business trends
May
17, 2000
ASPs move business applications online
For the
software industry and its end-users, a new crop of companies is beginning to
transform the world of computing by delivering business applications over the
Web. Instead of selling pre-packaged software, these new companies -- termed
Application Service Providers, or ASPs – rent their applications and deliver
them through a Web browser.
While the excitement
surrounding ASPs is relatively recent, Web-based applications are nothing
new. In fact, ASPs have become such a
routine part of the Web that most users take them for granted. Popular
Web-based e-mail services such as Hotmail
are actually ASPs that replace off-the-shelf software such as Microsoft Outlook
or Qualcomm’s Eudora.
What has
changed, however, is the extent to which ASPs are being used to deliver core
business applications. While ASPs are in the earliest stages of their development,
the number of businesses contemplating this route is accelerating rapidly. A survey
by the ASP Consortium found that two-thirds of German and British companies plan
to purchase products or services from an ASP in the next 18 months.
International Data Corporation projects
that by 2004 global spending on ASPs will reach nearly $8 billion, up from less
than $300 million last year.
Big market in small business
Currently,
the most rapid growth in ASP adoption is among small businesses. Cahners In-Stat group predicts that
by 2004 approximately half of all small business employees will use ASPs for
their applications. While large
enterprises are moving
toward the ASP model, they tend to be slower adopters, as they must deal
with greater complexity in any transition from enterprise software to
ASPs. At the same time, their large IT
departments are better able to support any software purchase.
For small
businesses, ASPs are an attractive alternative to traditional software. The
up-front costs of applications are considerably lower than for “shrink-wrap”
software, they require little or no technical support staff to operate, and
give small companies access to powerful applications that they may not
otherwise afford. At the same time,
small businesses can run complicated applications with minimal effort. Service providers host and maintain the
applications, and usually include technical support in the rental fees. Small
businesses only need to install a web browser and set up their Internet
connection.
At the core
of this attractiveness, though, is the flexible pricing
offered by ASPs. Instead of paying the full cost of the application up-front,
end-users are able to choose from a number of rental options. Total costs can
be based on the number of times an application is used (pay-per-use), the
length of time that a customer needs it (subscription), or even the amount of
processing power or bandwidth that a user consumes. While traditional software packages force users to pay for
functionality they may never use, ASP users pay only for the components they
need. For example, users who purchase
an office productivity suite pay equally for all the applications bundled
within it, regardless of which ones they use most. By contrast, ASPs offer the opportunity to rent only the needed
applications, and be charged on a monthly or per-use basis.
The ASP flood
In recent
months, the number of Web-based business applications has grown
exponentially. The number of U.S.-based
ASPs is expected
to increase from 70 in 1999 to more than 100 by the end of 2000, covering every
conceivable type of application needed.
- For businesses looking to
improve their productivity, Nuomedia,
Personable.com and Mi8 all sell subscriptions to Microsoft
Office. For a fee, typically less
than $30.00 per month, users gain access all the features and
functionality of Microsoft Office, delivered through their Web browser.
- To keep finances in check,
small businesses can rent time sheet and expense reporting applications
from Journyx and Expensable.com, Bizfinity sells subscriptions to a
full, Web-based accounting system, and Intuit’s Turbotax allows you to prepare and
file your taxes on the Web for a small fee.
- Companies wishing to improve
collaboration between their employees can set up an instant Intranet with
Intranets.com or MyWebOS’
Hyperoffice, while Driveway and
@Backup provide the tools to
back-up personal computers and networks.
- Businesses looking for
integrated solutions can turn to the rapidly growing ranks of full-service
providers and application aggregators.
Companies such as USInternetworking,
Corio and Navisite not only host a wide-range of
applications themselves, they also supply the infrastructure, technology
support, and implementation expertise needed to take full advantage of
ASPs.
Looking ahead
In the
short term, dozens
of new providers are emerging, resulting in a chaotic
period of growth and change. New standards,
practices and business models are being experimented with, at the same time
that providers and end-users grapple with issues of security, quality of
service and pricing. Meanwhile, existing software vendors are attempting to
make the transition from shrink-wrapped to web-based delivery of applications,
while other companies compete to build the technology and service
infrastructure needed to support this environment.
As ASPs
mature, they promise to fundamentally transform the way applications are delivered
and used, seamlessly integrating business and personal applications with the
Web. Ultimately, widespread broadband
and wireless access will further accelerate the adoption of web-based solutions
for applications and services, making ASPs as common as today’s shrink-wrap
software package
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