ASPs thriving in Asia

Partnering vendor brand-names, cutting new sales on a regional basis and positioning services in niche areas are helping Asia Pacific application service providers (ASPs) make respectable revenues of US$250,000 on average, according to International Data Corporation (IDC) in its latest report, Asia/Pacific ASP Roadmap 2001.

The research company also noted that the Asia Pacific (excluding Japan) ASP market will grow from US$96 million in 2001 to US$529 million in 2005, at a compound annual growth rate of 53 per cent. Singapore constitutes about 19 per cent of that total pie.

“Naysayers in the marketplace have been debunking the validity of ASPs for some time now, but our most recent research shows that the ASP model is inherently powerful and viable, in both trough and peak economic cycles,” said David Yew, program manager, IT services research group, IDC Asia Pacific.

“Whilst there is no denying that the adoption of ASP services in the region is being dampened on a number of fronts — a lack of market education and infrastructure, the economic slowdown and security issues — there are compelling reasons why companies are still looking to ASPs for solutions today.”

According to Yew, clients get immediate access to best-of-breed applications with a low capital investment in technology.

“The on-going costs of upgrades, costs associated with retaining skilled IT human resource are also significantly reduced, with speedy services, access, availability and performance guaranteed, and cash flows predictable,” he added.

ASPs highlighted Singapore, Malaysia, Hong Kong and Australia emerged as key focus markets in -order of importance for ASPs.

IDC anticipates that the number of ASPs having a strategic focus on select industries and maintaining a level of expertise in niche application suites will grow as ASP customers become sophisticated and as ASPs aim for internal operating efficiencies in order to compete effectively.

“Seventy seven per cent of ASPs indicated that they had targeted specific industries for their business, and of these, retail, discrete manufacturing and financial services are the most lucrative verticals this year,” Yew said.

In terms of applications, close to 40 per cent offer accounting, human resource, customer service, sales force automation, purchasing/procurement and payroll applications.

“Interestingly, this represents a mix of both front and back-end ‘practical’ applications,” said Yew. However, he notes that the jury is still out on the viability of many of these “one-size fits all” ASPs that prowl the landscape in search of their next customer.

“The Asia Pacific ASP market is still nascent in terms of industry awareness and operational applicability, and ASPs are still offering discrete application packages instead of end-to-end solutions,” Yew said. “ASPs will only reach new heights when tangible benefits like ROI and lowered costs are experienced by both enterprises and small and medium sized enterprises alike.”

Although demand is creating significant opportunities for ASPs in the marketplace, no one player can lay claim to market dominance across the region.