ASP: Illusion or Reality?

Are ASPs on the business community's RADAR screen, or is this term gibberish to the average IT exec? Recent market research clearly validates both points of view. What's going on here?

by Gerry Blackwell

Frenzied hype around the ASP market has almost inevitably raised expectations among prospective service providers and software vendors far beyond what reality is likely to support.

ISPs have been caught up in the euphoria only somewhat less than others. A new opportunity was opening up for ISPs, we told you. You could add great revenue-generating services. Customers would sign up in droves to rent online apps. You'd get rich! Eureka! Well, we, at least, never told you that last part.

But this publication, along with a myriad others, has contributed to the gold rush atmosphere around application hosting.

And while we still believe it offers an intriguing new business opportunity for ISPs, we suspect the present-day reality of the ASP market is not quite as rosy as many expected or still think it is.

Getting a handle on what's really going on, though—and gauging the potential level of disappointment—is difficult at best.

Optimistic outlook
On the one hand, we have the ASP Industry Consortium reporting in August that ASP use and customer satisfaction levels continued to rise impressively.

According to the study, conducted by Zona Research, 63.4 percent of 131 respondents—senior and executive level managers and IT professionals—said their companies currently access rental applications through an ASP.

And that is up from 52.4 percent the previous quarter. Not too shabby. Furthermore, most companies using ASP services use between two and six applications, Zona found.

But doesn't this sound almost too good to be true? In fact, we think it can't be. There is something out of joint here. Especially when you consider the other hand.

Dissenting view
There we have the most recent issue of IDC Corp.'s ASP Advisor, a free online publication from the Framingham MA-based market research and consulting firm, telling us that most IT executives don't even know what an ASP is.

Excuse me?

"It may come as a surprise to anyone who has been paying too much attention to industry press and vendor hype, but fewer than 10 percent of the likely decision makers involved in choosing to employ an ASP have a detailed awareness of them," the article says.

This is based on research conducted by IDC in August (hmmm) in which it polled a larger sample than Zona—which may or may not be significant. Researchers found that 58.3 percent of IT executives surveyed were "not familiar" with the term ASP. Another 23.7 percent had "only heard the term."

How can this be?

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