Study: ASP adoption rate in infancy

The adoption of services from application service providers is currently in its infancy, but awareness of ASPs is high throughout most of the world, according to initial results from a survey commissioned by the ASP Industry Consortium.

The survey, which was conducted by PMP Research, will be released next week as part of a series of surveys commissioned by the consortium. The initial phase involved 1,983 users from businesses including Australia, Belgium, Canada, Holland, Hong Kong, Italy, Mexico, Sweden, the United Kingdom and the United States.

According to the survey, only eight per cent of the respondents say they are currently purchasing or renting applications from an ASP, while just over 23 per cent say they would likely buy or rend applications from an ASP in the future. Yet, it shows 69.5 per cent of respondents are aware of the term ASP.

The low adoption rate was attributed to a lack of education and customer confidence, specifically around security, service-level agreements and outsourcing. “It makes sense [the adoption rate] is lagging,” says Paula Hunter, chairman of the consortium. “People are now aware of the term, and we need to focus on acceptance and knock down these barriers.”

Other findings of the survey included:

Accounting was the most popular application outsourced, followed by e-commerce, customer relationship management, office productivity suites such as spreadsheets and e-mail.

According to IDC, the top ASPs worldwide in revenue last year were: USInternetworking Inc. (US$100 million); TriZetto Group ($90 million); Oracle Corp. ($54 million); Interliant Inc. ($48 million); and QwestCyberSolutions LLC ($46 million).

The public sector is more attuned to ASPs, followed by distribution, finance, high-tech and manufacturing.

According to IDC, ASP market revenue will grow from $986 million in 2000 to $23.8 billion by 2005 – a compound annual growth rate of 89 per cent.

Part of the revenue increase will likely come from the current economic conditions. “Companies are tight with their spending, and they don’t have capital expenditure,” Hunter says. Some companies “have hiring freezes, so they think, how are they going to do the new projects? ASPs are more compelling – [companies] don’t have to spend capital, they know it’s a monthly expense and how much it is, and it’s quicker to market.”

William Martorelli, an analyst at the Hurwitz Group, says the consortium’s study findings about the adoption rate weren’t far off from what his research firm has seen.

Companies need to have the right situation to be involved with ASPs, such as they want to outsource or they are facing a “point of pain” in an upgrade, Martorelli says. “Companies are slowing down decisions of all kinds, and it’s not just ASPs. The slowdown in the B2B sector [affected the potential of] extremely promising growth for ASPs, but [the potential growth] hasn’t been entirely taken away.”

The consortium, based in Wakefield, Mass., was founded in 1999 with more than 700 member companies participating, including Cisco Systems Inc., IBM Corp.,, Inc. and Accenture Ltd.