InformationWeek

March 27, 2000

Solution Series:
The A To Zs Of ASPs

cores of software and hardware vendors, outsourcers, Internet service providers, value-added resellers, and even health maintenance organizations have announced their intention to become application service providers. But what exactly is an ASP? Which companies are the leading ASPs? And what distinguishes a good provider from a mediocre one? To find the answers to these and other questions, InformationWeek spotlights suppliers and customers in separate research studies released this week.

Information Resource Group, a leading IT market profiler, developed a study of ASPs that included in-depth interviews with more than 160 firms. IRG, in conjunction with InformationWeek Research, sought to identify the top 50 ASPs the way an IT manager might evaluate a potential vendor: based on key factors such as net ASP revenue, range of services, months of experience, application offerings, and partnerships, among other factors. The ASP 50 is featured here.

Net ASP revenue received the highest "weighting" of all data points collected in the study. Given the relatively small size of such companies, net ASP revenue is arguably the most telling sign of market presence and viability. In almost all instances, revenue was supplied by the ASP itself, based on the most recent fiscal year or quarter. In several instances, nascent ASPs were urged to supply projected annual revenue based on the most recent quarter multiplied by four. Corio Inc.--in a quiet period before its initial public offering--would not officially confirm InformationWeek estimates.

Identifying vendors as ASPs is somewhat like drawing a distinction between various schools of painting. (Is that painter an abstract expressionist or a retro postmodernist?) In the study, ASPs are defined as companies that rent or lease applications they procure for end-user companies--usually charging monthly fees rather than large lump sums. Often, the applications are accessible via a browser rather than specialized client software. ASPs serve the applications over a virtual private network, the public Internet, or dial-up connections. For these reasons, vendors that supply infrastructure capability or other services to ASPs but do not lease applications to end users were excluded.

The two studies, IRG's ASP Vendor executive overview and InformationWeek Research's ASP User Study: The Demand Curve, are available at informationweek.com/reports. For information about IRG's ASP database, including the ASP 50, visit www.irgweb.com.

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