The emergence of the application service provider (ASP) market is creating new revenue opportunities for Internet
Protocol (IP) backbone carriers who provide the infrastructure to deliver these services.
SINGAPORE - The worldwide market for ASP hosting is forecast to grow from $360 million in 2000 to more than
$2.5 billion in 2004, according to Dataquest Inc., a unit of Gartner
ASP hosting accounts for approximately 10 percent of the total ASP market.
"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 Chee Eng To, 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."
ASP hosting provides many challenges and risks, but for many of the carriers the possible rewards in this segment
outweigh the risks involved. "The carriers have been battling in the traditional bandwidth market, where competition
is driving down prices," 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 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,"
Demand for hosting translates into demand for backbone services. Gartner Dataquest analysts said this is because
hosting centers depend on IP backbones to connect ASPs with customers. "It's a strategic imperative for IP
backbone carriers to be successful in the ASP market because of its enormous growth potential," To concluded.