ASPs – how IT can learn from the Comms guys

1999-10-25

If the rumours are true, Application Service Providers, or ASPs, are going to dominate the way in which IT services are procured and delivered. At Bloor Research, we have reason to believe the hype. As for the vendors, they have a stark choice to make. Some are embracing the ASP model whole-heartedly, whilst some are hedging their bets.

Networking and comms vendors are in an enviable position concerning ASPs, for two reasons. The first is that they stand to gain whatever happens. The provision of application functionality over the Web, requires a networking and communications infrastructure capable of sustaining a multitude of reliable data pipes between an organisation’s internal networks and the outside world. As it becomes business critical, no longer will the Internet connection be under such tight constraint, either by budget or by policy. Besides, ASPs are only one area which requires an enhanced networking infrastructure: there are plenty of other usage models, not least business to business eCommerce, which will ensure that the networking revenue stream is protected. The second reason is that ASP capabilities are defined primarily by which technologies networking vendors are able to deliver. Application and systems providers are dependent on networking providers, a fact which can be exploited by the latter.

So, what about the traditional IT companies – the manufacturers of systems hardware, systems and application software? Some, such as IBM, SUN, Oracle and Microsoft are adopting the ASP model wholesale. Of course, the industry giants can afford to develop themselves in the ASP market with much less risk than smaller players. This week, Microsoft announced a partnership deal with Cisco which will enable small-to-medium sized businesses (typically sub-100 staff) to use Microsoft software over the wire. It is likely that more and more vendors will jump onto the ASP bandwagon, however in doing so they are likely to miss one fundamental point.

The ASP model is currently seen as a facility to deliver applications across a network, thus reducing costs. This view is valid, in the short term, but it ignores the full potential of the ASP concept. Once applications can be delivered, then they can be combined and assembled in previously inconceivable ways. Communications services, application services and business services will all be delivered in the same way, enabling even more combinations. This kind of shake-up is already being experienced in the telecommunications marketplace, as convergence finally starts to happen. Issues faced by these companies include how should a properly managed service be developed, provided, and most of all billed for. These, same issues are to be the bane of the ASP: vendors prospecting for a chunk of ASP real estate will do well to watch the successes and failures in the comms market, and learn from them.

(First published 25 October 1999)