ASP's – The Age of the Information Power Hub

1999-10-14

The momentum behind the ASP movement is such that it seems to be only a matter of time before we see all software being provided 'off the wire'. The Application Service Provision model refers to the predicted rental of applications, which are accessed via the Internet using a standard browser as the front end. At least, this is the initial model: in the future it is expected that customers will be able to integrate ASP services into their own applications. Both models make perfect sense. Consider, for example, the ERP market which has long been the exclusive domain of larger companies which can afford the inflated list price (and associated consultancy) that an ERP implementation can entail. ERP companies have been forging alliances with telcos and ISPs (for example, SAP with BT) to give smaller companies access to applications which are preconfigured for a given market, for example retail, warehousing, engineering and the like. Not only is the cost of entry reduced, but also support levels are touted to increase, compared with the likely levels of in-house resource.

This is a model that makes perfect sense, for vendor and customer alike. The economies of scale that can be gained from these larger installations yield clear benefits to the vendor, which can be translated to a greatly reduced per-user cost. As the ERP market has largely become saturated, vendors have been looking for a way to tap smaller organisations: the ASP model is just the answer. ISPs, too, are looking for ways to differentiate their own services from others’ and also for ways to bring in revenue as the basic connection costs reduce to zero. ASP services enable ISPs to offer far more capabilities to a much broader range of organisations, and also to make money, a factor which is becoming an increasingly difficult given the burgeoning competition and the disappointing revenues gained through advertising.

The emergence of the ASP industry is to a great extent being enabled by the pace of technology. Previous technological limitations, which effectively prevented the real time access to applications over the Internet, have been eroded. This is primarily down to greater bandwidth coming online at cheaper prices, but is also down the capabilities of both hardware and software to support a far greater number of potential users. Solutions now exist to meet the security fears of most, or at least to reduce them to acceptable levels.

No longer will the end user be buying, installing, configuring and supporting software. Rental is the name of the game and it will dramatically change the industries involved. The computer and telecom industries are on the brink of a step change. The models for distribution are mutating, leading us into an age where the computer industry will resemble that of the electricity utilities, providing farms of processors, storage and preconfigured applications all dedicated to serving the world with data and software.

As you might imagine these changes will be far reaching and the customers will be the last to learn, but their position is changing too. In the future, software users will fall into one of three categories. Anyone whose business has an information element (and that goes for most) can become an ASP, from pharmaceutical and genetic research companies to organisations which decode and manipulate video streams. A company will either be an ASP itself, an ASP customer, or a combination of the two where it not only uses the software of others but also build and deploy their own solutions as rental services.

(First published 14 October 1999)