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July 1, 2000 Over *4,000 subscribers* Volume 2, Issue 7 Online:
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ASPs Expand Their Offerings and Customer Base
by Mitchell Levy
Executive Producer,

It was just two short years ago that the acronym ASP first appeared on the horizon of leading market research firms. Less than a year later, major data centers including Exodus, Navisite, and AboveNet were planning their revenue growth on professional services to support Internet firms who host business applications including Microsoft Office, Siebel sales automation, and ERP applications from SAP and PeopleSoft.

Related terminology:

  • ASP Application Service Provider
  • AIP Application Infrastructure Provider
  • BSP Business Service Provider 
  • CSP Commerce Service Provider
  • ISV Independent Software Vendor
  • NSP Network Service Provider
  • SI/VAR Systems Integrators/Value Added Resellers
  • SSP Storage Service Provider

What is an ASP?

Exactly what is an ASP? Essentially, an ASP is a vendor who makes applications available on a subscription basis. An application service provider manages and delivers application capabilities to multiple businesses from data centers across a wide area network. ASPs give customers a viable alternative to procuring and implementing complex systems themselves. In some cases, ASPs even provide customers with a comprehensive alternative to building and managing internal information technology operations.

Value proposition of an ASP:

The value proposition of an ASP is simple: a hosted and managed solution, often custom engineered to provide rapid implementation. ASPs often provide process support, in essence appearing to be a 24/7 IT service bureau. ASPs like Corio and Oracle can provide effortless progression to each new version of the applications, which now appear as a continuum of evolution and (sightless) improvements, with no incremental jumps in the learning curve. This creates significant cost savings for customers, allows easy support, and provides an environment for simplified upgrades and future applications additions. ASP customers also are able to more precisely control the total cost of technology ownership through scheduled payments, rather than having to make large capital equipment investments with and manage complicated depreciation schedules.

History of ASPs:

The first ASP implementations were not recognized as such; these were our our email services provided by ISPs, and later the web hosting services that accompany most ISP offerings. Electronic commerce packages, which once were the domain of complex solutions installed and configured on custom built servers and hosted in co-location centers, are now being offered by CSPs - ISPs acting as Commerce Service Providers. In the last year, the majority of tier-one ISPs have purchased complete offerings from Intershop, Open Market, and Mercantec, and re-licensed them to subscribers. In addition to remote hosting, these solutions were configurable through a Web browser, making set-up, configuration, and maintenance much easier.

Where they fit:

Today there are over 500 ASPs who are providers of hosted applicationsand managed services, and facilitators of complete end-to-end business solutions. BSPs (Business Service Providers) now act as virtual business partners that provide choices regarding how software applications are managed and delivered. Oracle now offers its own ASP solution for ERP services, hosting it along with the Oracle 8.i software rather than selling directly. Corio hosts both SAP and Peoplesoft ERP systems as a managed business solution, rather than simply timeshare on a complex application framework.

New ASP Solutions:

But ASPs offer common solutions, where timeshare is the working model. Microsoft partnered with Corio to offer its complete Office solution to large enterprises, saving in cost of installation and support. More importantly, customers can pay based on measured use, rather than having to pay high up-front fees for thousands of independent workstations. A new class of ASPs offering network storage (SSPs) gives firms network access to unlimited storage on a pay-per-use basis, easing rapid storage demands of enterprise intranets. Seagate announced an alliance with HP a year ago to integrate its network storage solutions with HP's e-services offering. TurboTax, known for its income tax workstation software, made a decision to become a completely online service, and has a goal of processing 80% of all US tax returns online by 2007.

Free ASPs:

More recently, Internet high flyers such as Hotmail and Geocities became household words as free ASP services became adopted by the majority of email and web hosting sites. Today, over a dozen free e-commerce ASPs exist, with clustered business packages offered to complete the web store presence. Free B2B service now include Internet fax, voice mail, virtual meeting centers, and calendaring services.

Role of the Data Center:

Forward-thinking co-location firms Exodus and AboveNet were early to recognize the need to support ASPs with more than just world-class data center space. Exodus, which played an active role in the early formation and guidance of the ASP consortium (, recognized the need for professional services to support ASPs with database and infrastructure engineering, advanced monitoring, failover, and data back-up services. Exodus created a services unit expressly to help ASPs grow as e-businesses, and today almost 25% of Exodus' revenue is derived from professional services.

The evolution of the model now includes ASPs connected to other ASPs to offer building blocks of complete e-business solutions; desktop and messaging, financial management, Customer Relationship Management, procurement, human resources, and business intelligence. Two data center firms to watch here are Navisite, a CMGI company, and Corio, both operating in California.

Navisite was early on the scene in clustered ASP offerings, but wasn't originally recognized as a provider of such. The CMGI investment approach has been to acquire Internet firms and merge their core competencies inside their data centers. Navisite offers high end web hosting, server and database management services, and combines them with an ad serving engine all under one roof. NaviSite also offers wholesale ASP services to ISV partners, who in turn can offer this software as an application service to their members. From multimedia applications to online catalogs to web tools, ISV partners offer a diverse array of application services, becoming a "downstream enabled" CSP by virtue of NaviSite's services.

Corio has gone far beyond the first generation ASP model of simply reselling and hosting a point application. Corio brought together industry-leading applications for each functional area across the enterprise, and offers them as a fully integrated solution over a secure network, for a monthly fee. In order to offer this to customers in a supportable and replicable way, Corio provides the solutions from a common technology platform. Integrations, customizations and other technology features are written once and deployed everywhere, using their OrionT platform.

Internet Computing, the n-tier e-business model, and the Future of ASPs:

Oracle invented the Internet Computing Model, and more lately has joined firms including IBM to push n-tier computing, which uses "middleware" to connect Web and application servers to back-end legacy systems. Both Internet computing and the n-tier architecture have extended the reach of ASP technology; starting from a Web / application server, the ASP can now reach deeply into legacy systems of large enterprises, or through EIA (Enterprise Integration Applications) to interconnect business applications from any company to any other company. In so doing, a fluid system of architectural technologies creates the foundation for business process at the IP layer. This forms the basis for interconnected ASPs, an ecosystem for the next generation of e-business. (The ecosystem concept is practically in the public domain).

Creating new business models:

ASPs have risen far past being service providers, by creating custom offerings that encompass the complete business needs of both brick and mortar and Internet companies They offer the ability to create a completely virtual business where everything is outsourced, and companies can be launched with little more than brand, patents, and vision. ASP packages for ERP and supply chain, manufacturing (MRO), and financial management offer any company in a supply or value chain the ability to participate in engagements of any length, simply based on business rules and availability of physical resources. With the ability to inter-link and integrate electronic commerce applications through ASPs like Corio and NaviSite, the future of the digital economy will be defined by invention of business models, not automated business process.


The ASP consortium, founded a little over a year ago, started with 90 charter members, and has grown to over 400 companies today. It will probably have over 1,000 members by the end of 2001. The ASP market itself may grow to include all "shrink wrap" packaged offerings, i.e., Microsoft Office and TurboTax, within 5 to 10 years, replacing half the desktop and workstation applications in home, SME, and enterprise markets.


Just as Web hosting has become a function that is more commonly outsourced than not, complicated and mission critical business applications such as ERP systems are expected to be outsourced more often than not by 2005. More importantly, almost 80% of new ERP implementations will be hosted by ASPs such as Corio and Oracle. The real growth could be the 8 million small businesses that will require digital connectivity to the business processes and rules of suppliers and customers as the Fortune 5000 companies migrate to a completely digital platform, and require everyone in the value chain to participate. Though the ASP market and model is still relatively new, computer industry analysts foresee rapid growth and multi-billion-dollar annual sales within the next few years. But as industry leaders like NaviSite, Exodus, Corio, Oracle, IBM and HP have shown, the real contribution of the ASP may be in its nexus of the digital ecosystem.



Let me leave you with a few of my favorite quotes this month:


I am based in Taiwan and work the Asia Pacific region. I do not see much of an increase towards ASP's for Foreign companies. The older senior management just do not "get it"... Why buy, maintain and support what you can lease. The forecast costs are fixed and you do not have to support a software team.

(David Hemmings, President, Global Stallion Ltd., TAIWAN)

In a way, it's a throw back to the days when 'bureaus' would rent time and space on mainframes. The software is a LOT different, but the concept is not new.

(K.G., Silicon Valley, California, USA)

Many companies, large and small, are beginning to consider and use ASPs. The value is particularly high for companies with distributed workforces and those who want to track and manage their software and IT services more efficiently.

(Veronia Williams, Founder, DiscoverIT)


I hope you enjoy this eZine.

See you in cyberspace,

Mitchell Levy

Executive Producer, <>
President, <>
Founder and Coordinator, SJSU-PD ECM Certificate Program <>
Chair, ECM Symposium (Oct 4-5, 2000) <>

  • ECM Symposium (Oct 4-5, 2000) is a 2-day event featuring the best and the brightest ECM Professionals in the World. Seats are now being sold.

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  • San Jose State University, Professional Development, Electronic Commerce Management (ECM) is a Certificate Program for e-commerce professionals (


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