SINGAPORE - Internet protocol backbone carriers that provide the infrastructure to deliver Net-based services should see new revenue streams from the application service provider market.
Internet hosting players should see tandem growth as the worldwide market for ASP hosting expected to grow from $360 million in 2000 to more than $2.5 billion in 2004, according to Dataquest Inc., a unit of Gartner Group, Inc.
"ASPs depend on reliable and high-performance networks to deliver their service to customers. This puts the Internet hosting players, whose core strength is network infrastructure, in a natural position to play a leading role in this market," said To Chee Eng, senior analyst for Gartner Dataquest's e-IP Backbone Strategies and Opportunities Worldwide program. "The risk is low because hosting players can rely on conventional hosting revenues while building up ASP market share."
The worldwide ASP market is forecast to grow from $3.6 billion in 2000 to $25.3 billion in 2004. ASP hosting accounts for approximately 10 percent of the total ASP market.
Rewards outweigh risks
Although ASP hosting bears its fair share of risks, the possible rewards make it a worthwhile venture. "The carriers have been battling in the traditional bandwidth market, where competition is driving down prices," Mr. To said. "As such, carriers have to find a way to move up the value chain, differentiate themselves from competitors and find a new revenue stream. With ASP hosting, backbone carriers are in a prime position to capitalize on this potentially lucrative market," To added.
To be successful in the ASP hosting market, players need to demonstrate that they can deliver corporate-class applications. "This means they have to engineer their networks to deliver a consistently high quality service, backed by service level guarantees. Those who can deliver a premium service will be able to charge premium rates," Mr. To said.
"It's a strategic imperative for IP backbone carriers to be successful in the ASP market because of its enormous growth potential," Mr. To said.