It’s slow growth ahead for ASPs

BANGALORE: Contrary to the excitement created about the growth of Application Service Provider (ASP) phenomenon, the global market is expected to be only 1 per cent of the total IT industry by 2004, though it would grow at an compounded annual rate of 91 per cent. This was stated by Wipro Net Ltd. managing director T.K. Kurien while delivering a lecture on the future of ASP market at IDC India’s Directions 2001.

He said that the reason everybody is jumping into the ASP bandwagon is that nobody wanted to be left out of the race. The market is expected to touch $7.75 billion by 2004 against $300 million in 1999, according to IDC.

Mr Kurien said among the three types of ASPs - enterprise ASPs, collaborative ASPs and personal ASPs - collaborative ASPs, followed by personal ASPs, would be the biggest growth market. The possible pricing options would be implementation charges, support and training charges and usage charges. Some of the parameters of costing would be per user per month, per user per application, per user per hour, per transaction per application and per application CPU.

He said that it would take time for the ASPs to educate customers and help them understand the benefits of using an ASP services. The current growth of ASP business is limited by the slow growth of Internet infrastructure, which is expected to be established during the next five years. However, a strong foundation for the future spending would have been built.

IDC estimates that the ASP market in India would be about Rs 110-100 crore by 2004. "However, this depends on how fast the infrastructure improves and outsourcing catches up, which has not picked up as it has in the US," Mr Kurien said. In India, the ASP services are initially targeted at large corporates, the client base being very small.

Enterprise ASPs tend to offer managed or extended services based on analytical, vertical, ERM, CRM and enterprise e-commerce applications. According to IDC, this will be the domain of ASPs that have a moderate to strong knowledge of systems integration and business needs first and foremost. They will provide consulting, implementation, on-going support and maintenance for the customer. Enterprise ASPs will focus on a wide range of industry sectors.

Collaborative ASPs often need to consider their offerings in light of specific enterprise needs and to link their application services to enterprise systems. They develop and deploy email, messaging, calendering, scheduling, newsgroups and other collaborative applications on an outsourced basis. IDC feels that this will be the domain of ASPs that have a strong blend of network reliant applications and network expertise.

The applications offered by personal ASPs include office suites and consumer applications. Their primary responsibility would be to guarantee network access to application. Minimal application and systems integration capabilities are required to run personal ASPs. According to IDC, these ASPs will target their services at SOHO and consumer market.

According to a study conducted by IDC India, as much as 64 per cent of small sector players said that they were not aware of ASP. This figure was 43 per cent in the large sector and 59 per cent in the medium sector. However, there is a willingness to go for ASP services in India.

The thrust in India today is on building data centres, networks, gateways etc. The ASP palyers in the country are busy making partnerships, experimenting with a small base. Their business model is skewed towards domain hosting space and not mass market. Direct sales channel, consultative selling approach.

Giving tips for a successful ASP model, Mr Kurien said the players should jointly promote their interests, generate awareness among the end users and deal with the barriers. They should establish tight partnerships and leverage on partners’ strengths but project one face.