ASPs are the next big thing, after all

Bullish IDC

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ASPs, as Application Service Providers are familiarly known, were not so long ago supposed to be the next big channel thing. However, customers have been less ready to commit to ASP-style firms. There has been an inevitable backlash among financial and IT analysts.

But not IDC. It estimates that ASPs collectively produced almost $1bn-worth of sales worldwide in 2000.

The market research firm is upbeat about the sector. "Despite the challenges... market growth remains strong", it says. IDC even uses the word "blistering" to describe CAGR (compound annual growth rate) for the sector. It estimates this at 89 per cent, propelling sector turnover from $986m in 2000 to almost $24 billion in 2005.

According to IDC analyst Amy Mizoras, the ASP market is moving beyond hype and has already produced some success stories. "Our data clearly shows that ASPs are alive and kicking," she says.

IDC reckons the growth drivers are the "adoption of ASP services within large companies and the formation of supplier partnerships".

The US is by far the biggest ASP market and will remain so through to 2005. Western Europe is "an emerging opportunity", producing $93m in ASP revenues in 2000, but forecast to pull in $5.7 billion in 2005. This is a 128 per cent CAGR. IDC points to the "lack of skilled IT professionals and the sophistication of service-level agreements" as growth drivers for the region.

IDC is less confident about who the dominant players will be. Jessica Goepfert, IDC analyst says: "It's generally accepted that software as a service concept will become the accepted delivery model for application functionality. However, what is yet to be determined is who will be the dominant suppliers of these ASP services. This means that even the ASPs who are the current market leaders cannot afford to rest on their laurels."

Perhaps another thing worth pointing out is that this soaring ASP market does not represent some magic pot of new money. Corporates will not be shovelling any more into IT budgets - the idea with ASPs, ultimately, is surely to spend less - they will simply be spending existing budgets in different ways. ®

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