ASPs Fail to Make Inroads

Application service providers (ASPs) haven't made significant inroads into corporate America, according to an exclusive analysis of data provided by Survey.com. In a survey of 2587 IT professionals, only about 10 percent indicated that their companies use ASPs. Perhaps more revealing, as Graph 1 shows, almost 69 percent reported that their companies aren't using ASPs and don't plan to.

ASPs have long been presented as a potential major payoff from large-scale investments in high-speed networks and Internet-based technology. ASPs, the thinking is, will turn software from a product to a service. By using ASPs, companies improve management and control of software expenditures.

It hasn't quite worked out that way. Moving to an ASP model can be complicated, in part because the ASP approach has appealed to companies looking for location-wide or enterprise-wide installations. Graph 2 shows the organizational level at which companies are using or plan to use ASP services.

The figures reveal that more than 80 percent of current or planned ASP use involves complex installations, typically in multiple departments at a single location. Organizations envision ASP services as an enterprise-wide solution spanning multiple locations in 55.6 percent of the cases.

Rather than accelerating more cost-effective approaches to software deployment, the IT spending slowdown might further cloud the ASP prospects. Successful ASP services require robust, high-speed networks. Slow or unreliable performance makes users unhappy (actually, in my experience, they go ballistic). As illustrated by networking companies' recent earnings warnings and shortfall announcements, companies are cutting back network investments, possibly delaying the development of networks hardy enough to use ASP services.

ASPs' potential intrigues both large and small companies, although ASP services are generally promoted as enterprise-wide solutions. Graph 3 shows the total number of employees in organizations using or planning to use ASP services.

Clearly, both ASPs and companies contemplating the ASP route face significant short-term challenges, including potentially complex user adoption issues and investment shortfalls in funds required to develop sufficient underlying hardware infrastructure. Such realities reinforce the traditional approach to software—but IT managers shouldn't fall behind in reviewing ASP technology and its potential. Things might change.