Application Service Provider (asp)

An Application Service Provider (ASP) delivers software functionality to its customers over the internet. The software executes from a remote location and data is stored remotely. This model of service delivery has potential economic advantages relative to models in which software is executed and data is stored locally (on your computer’s hard drive, for example).

The factors that drive ASP emergence are:

• Speedy implementation. Setup time for services acquired via the ASP model was usually much shorter than the time a company required to set up a similar IT capability internally. A company seeking to acquire the capability needed only to access the already built and tested capability from the ASP.

• Cost reduction. Because ASPs served many customers, they could realize economies of scale in service delivery that were not available to individual customers. The ASP model held the promise, therefore, of much lower cost of delivering IT services to individual firms.

• Favorable cash flow profile. IT investments had traditionally required large up-front cash outlays and yielded only eventual and uncertain (because of high IT project failure rates) benefits. Functionality acquired via the ASP model, in contrast, required only modest set up fees with additional payments due after service delivery had already commenced. “Subscription-based” ASP computing provided a better match between benefit and risk than did the large, front-loaded, risky investments traditionally required to acquire IT capabilities.

• Support for 24x7 business operation. Unlike traditional business operations, web-based businesses were expected to operate around the clock. But creating facilities and processes to support always-on operations required specialized expertise that most companies lacked. Even companies that had focused on high availability in earlier eras found themselves in a completely different game when facing

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