The Application Service Provider (ASP) is a third-party entity that manages and distributes software-based services and solutions to customers across a Wide Area Network (WAN) from a central data center. The need for ASPs has evolved from the increasing costs of specialized software that have far exceeded the price range of small to medium-sized businesses. Furthermore, the growing complexities of software have led to huge costs in distributing the software to end-users. Through ASPs, the complexities and costs of such software can be cut down. In addition, the issues of upgrading have been eliminated from the end-firm by placing the responsibility on the ASP to maintain up-to-date services, 24x7 technical support, physical and electronic security and in-built support for business continuity.
ASP services are expected to become an important alternative, not only for smaller companies with low budgets for information technology, but also for larger companies as a form of outsourcing. The strategy of providing application services in a hosted data center style has struck the right cord among enterprises, since moving mission-critical applications to the ASP model managed by a third party provides cost benefits. Therefore, it is of little surprise that in an environment of budgetary constraints, lack of capital for investments in IT assets, reduced corporate spending and the general strategy of “doing more with less”, the market for ASP services will continue to see strong growth, despite tight corporate IT budgets.
In 2011, the worldwide enterprise application software market generated $115.1B in revenue, and is projected to grow to $157.6B by 2016, attaining a 6.5% Compound Annual Growth Rate (CAGR) in the forecast period. Gartner reports that 38% of worldwide enterprise software revenue is from maintenance and technical support; 17% from subscription payments; and 56% from ongoing revenue including new purchases according to Gartner’s Forecast: Enterprise Software Markets, Worldwide, 2011-2016, 3Q12 Update.
ASPs come in many shapes and sizes. According to ASPnews.com, ASPs are broken down into five types:
An Enterprise ASP delivers high-end business applications; it usually refers to a software platform that is too large and too complex for an individual business deployment. Enterprise applications are typically designed to interface or integrate with other enterprise applications used within companies, and to be deployed across a variety of networks (Internet, WAN and corporate Local Area Networks (LANs).
A Local ASP supplies a wide variety of application services for smaller businesses in a local area.
A Specialist or Functional ASP provides applications for a specific need, such as marketing services or human resources.
A Vertical Market ASP provides support to a specific industry, such as banks or healthcare. The application typically targets a smaller number of users with specific skill sets and job responsibilities within a company. Vertical applications are often more complicated to use than enterprise or functional applications, and because they need to integrate with other systems used in the company, they require IT assistance and deployment over secure private networks.
A Volume Business ASP supplies general small/medium-sized businesses with prepackaged application services in volume.
Applications, whether they are vertical, functional or volume applications, messaging, live collaboration or basic web-based services, consume more and more bandwidth with the increase of application usage and complexity. The amount of available bandwidth and the reliance on the network and its service capabilities are relevant to the successful delivery of application services. Connectivity options to business applications include Dedicated Internet Access (DIA), Ethernet Private Line (EPL), and Multiprotocol Label Switching (MPLS), and can be purchased as dedicated or shared services. In addition to bandwidth scalability and flexibility, ASPs must have robust technology for network security to protect the business data flowing over the wide area network and network monitoring to ensure that applications remain running.
Major benefits for companies using applications with the ASP model is that they save more time and money, and also increase their productivities. What ASPs are you using today? How are you connecting to your ASP? Are you getting the performance you need for your business applications? Share your view in the comments section below!
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