Most application service providers (ASPs) are unlikely to reach critical mass, with users shunning all but the most simple packages offered, according to analyst Giga Information Group.
The ASP model, in which suppliers rent applications over the internet on a one-to-many basis, promises lower costs for users because they don’t have to manage their own applications. But companies are only choosing services that need little integration at the back end.
‘There are isolated applications, such as email and human resources, which are viable to implement via an ASP. But as for the more complex applications which need integration, like enterprise resource planning [ERP] or customer relationship management [CRM], they are just not appropriate,’ said Giga industry analyst Pascal Matzke.
‘This will turn into a commodity market providing simple applications. Most of the pure-play ASPs don’t have the level of brand recognition to become trusted ventures. For the rest, it will be business as usual with large outsourcers such as IBM and CSC absorbing the ASP model into their portfolios,’ he added.
BT Ignite claims to be the most successful ASP in Europe, but sales of its Finance Manager package have been slow.
‘Some people see ASP as the provision of ERP systems but, from our perspective, what people have been buying is e-trading and email on an ASP basis. We thought finance and accounting would be big, but it’s been a real slow burner,’ said Sally Davis, president of Ignite application services.
‘Of the 12,000 customers, only a handful are on Finance Manager based on a SAP R/3 module,’ she added.
Once customers get used to the ASP model, they will want to use integrated e-trading and financial systems on an ASP basis, Davis believes. Ignite will announce ASP-based CRM services next month, and application services will have a turnover of more than $100m this year, the vast majority of that coming from the UK.
‘It’s a steep learning curve, and some of the software hasn’t been put together with this in mind. We are still using a lot of software built with the user licence sale in mind, and we are awaiting the next generation of software,’ said Davis.
First published in Computing