The truth about ASPs

Taking a close look at the application service provider (ASP) market is a bit like visiting Disney World. You start off starry-eyed, but sooner or later you have to leave Fantasyland. At first glance, the ASP market is a ripe opportunity for solutions providers that are eager to serve small businesses. The sales pitch goes something like this: For a "nominal" monthly fee (usually about $20 (£13.37) per customer desktop), an ASP can host mission-critical apps that a small business otherwise couldn't afford.

Market pundits see plenty of dollar signs. A bullish Data quest, for one, predicts annual ASP revenue will skyrocket from $2.7bn in 1999 to a whopping $22.7bn in 2003. With such rosy forecasts, it's no surprise that most major hardware and software players are formulating an ASP strategy.

To be sure, the ASP market holds plenty of promise. "Some of us believe the ASP hype makes sense," says Ellen Hancock, president and CEO of Internet data-centre specialist Exodus Communications. "The market certainly sounds right to those of us who worked in the time-sharing market."

It sounded right to Sm@rt Reseller, too—until we took an unprecedented step. On a trial basis, Sm@rt Reseller's entire editorial team outsourced its email system to a New York-based ASP. While we remain cautiously upbeat about the long-term prospects for this emerging market—and far more optimistic about data outsourcing in general—our project revealed that the Internet will need some major refinements in order for ASPs to fully flex their muscles.

To Part II An optimistic beginning

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