$25B ASP Market By Year 2004

Gartner Group researches the future of ASP market. Along the way though, about 96 percent of today's ASPs will cease to exist, and the term ASP will be replaced by other names. Find out what else the research team has discovered...

Over a five-year period stretching from 1999 to 2004, the ASP market will boom from a $1 billion emerging industry to a $25.3 billion gold mine, according to new research to be released today by the Gartner Group. Along the way, though, about 96 percent of today's ASPs will cease to exist, and the term ASP will be replaced by other names.

In a press teleconference today, Gartner analysts predicted that the worldwide ASP market will grow from $1 billion in 1999 to $3.5 billion by the end of 2000 and $8.4 billion by the close of 2001. Also by 2001, however, fully 60 percent of ASPs will fail, said Gartner VP and research director Audrey Apfel.

"We felt the need to warn the industry about the rocky road ahead," Apfel remarked. Too many of today's ASPs are not taking the time to position themselves for the software and service markets of the future, the analyst suggested. Although "buying ASP services is deceptively easy," the ASP delivery model is "deceptively complex." The "trough of disillusionment" looks likely to hit soon, she cautioned.

According to the Gartner analysts, most successful ASPs will concentrate on no more than two layers in a six-layer model that includes applications, platforms, operations, networks, end services and customer relationship management.

Consequently, the market is almost by definition a game of partnerships. Meanwhile, ASPs already are starting to differentiate their services by morphing into new business models such as "business service provider" and "Net services company."

The ASP market also will be fraught by the same kind of consolidation already impacting the dot-com world. Telecommunications companies and other infrastructure providers will be among the most likely acquirers of ASPs, said Benjamin Pring, principal analyst.

Larger ISVs such as Oracle and SAP also are beginning to become ASPs, the analysts acknowledged. On the other hand, the rise of the ASP approach also means that ISVs will need to add more off-line capabilities to their software, while adhering less than they do today to server-intensive thin-client architectures.

With its recently unveiled .NET initiative, Microsoft also is making a big step into the ASP arena. Microsoft "will enter a market when it represents a threat to their traditional business," Apfel noted. Microsoft's entrance "gives some validity to the market," she added. But Microsoft will not necessarily dominate the ASP space, Apfel predicted. Instead, Microsoft will need to successfully manage the same "balancing act" as other players.

Other changes forecast by the Gartner analyst include increased use of wireless and mobile ASPs, as well as further expansion beyond horizontal applications, such as human resources into vertical markets like health care and retail.

Right now, the market surrounding wireless and mobile ASPs "isn't in fact standard or commodity enough," Apfel asserted. "[But] we think this will be an important piece as enterprises [start to need] wireless applications but can't build them by themselves," she elaborated.