The ASP Future

By SmallBusinessComputing Staff | Posted October 01, 2000
by Cathy Brower

A few weeks ago, i embarked on an interesting journey. I spent a week on a whirlwind tour of northern and southern California. Aside from discovering that people on the West Coast spend way too much time in their car, I met with many vendors who bring you products and services.

Several of the vendors I met with were ASPs (application service providers). They spent an hour telling me how their services differ from their competitors and they all made some pretty convincing arguments. They all did their homework and had an accurate grasp of the small business marketplace. They seemed to have a handle on what you are looking for and what your needs are. They understood what business functions you need streamlined and they even understood the inherent challenges in the ASP model. Meaning they realize that they will have to convince you to relinquish some of the details of your business over to them and assure you that you are still in control.

All in all, I was pretty impressed. But the reality is that many of these businesses won't be around in a few years. According to the Gartner Group, an information technology market research company, application service providers are racing after a slice of what will become a $25 billion market by 2004. But more than half of them will crash and burn or be bought out long before then. Gartner is still very bullish on the ASP market, but as I have said before -- CHOOSE WISELY. No one doubts that you can save money by avoiding the purchase of copies of software and periodic upgrades. In fact, according to Gartner, ASPs reduct total cost of ownership for applications from 30 to 70 percent. But the downside is the dependence you would have on your ASP in an industry where many will be consolidating or going out of business.

According to this research, sixty percent of the 480 or so ASPs in business at the end of this year will be gone by the end of next year because of bankruptcy, lack of venture capital, mergers, and traditional competition. No matter how careful you are in your selections, there may be a rocky road ahead. Do your best to cover yourself. Check the finances of the ASPs you are looking at, see who their partners are, and who has invested in them In the long run, there is no such thing as a sure thing, but try to keep the odds in your favor. We will continue to report on the industry and provide information to help you make educated decisions. I still believe there is no reason not to use an ASP. The benefits are clear and great, but be smart about it.

As we head toward the future, like with the ASP model, more and more business will be conducted on line and we will all have to learn to roll with the punches to a certain extent. In this issue, we tell you the pros and cons of doing your finances on line. Turn to page 38 and see what conclusions you can draw. As always send use your comments at cathy_brower@ftmg.net.

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