InformationWeek

As with most new products, some exciting claims are being made. In theory, ASPs can reduce IT staffing requirements, lower overall costs, speed application implementation, simplify upgrades, improve performance, and enable new external customer services. The realization of these promises will depend on your environment and needs-and on the capabilities of the ASP you select.

Application outsourcing is certainly not a new notion-E-mail and help-desk outsourcing have been particularly viable options. There's no doubt that many business customers are willing to turn over some of their applications to service providers. And, as it turns out, those who've dipped their toes in the ASP water consider themselves likely to go deeper into the pool.

In an InformationWeek survey last fall (Oct. 11. p. 163, ASP adopters said they would continue down the path and cited enterprise resource planning, data warehousing, and their intranets as the most likely applications to turn over to ASPs. The same survey found that ASP advocates sought reliability, application-specific expertise, customer service, and access to high-quality applications. These top four concerns speak to two factors fueling the ASP boom.

Reliability and expertise address the ever-growing pressure on IT organizations to provide more service with the same-or even shrinking-budgets. Certainly everyone is familiar with the tremendous market need for qualified IT staff. IT managers at all levels will attest to the fact that finding and retaining highly qualified staff is becoming the No. 1 challenge.

Addressing these two needs alone is sufficient for some companies to consider using some sort of ASP-like service to host certain applications. The idea is simple: Take the most difficult applications to manage and give them to a company that guarantees it will make them run right.

Customer service-especially in combination with a need to access high-quality applications-is the focus of a different sort of ASP customer. While any buyer of application services will demand good support, that requirement, coupled with a desire to use an application otherwise out of reach, implies that ASPs are opening new markets to the applications they sell.

The 2,000 or so largest U.S. companies have been using back- and front-office applications such as ERP and sales-force automation systems for some time. Meanwhile, the midtier of the market hasn't been so willing or able to fork out the big bucks necessary to buy, integrate, and maintain these complex systems, often turning to shrink-wrapped systems that are far cheaper to buy and run.

The vast majority of new ASPs specialize in providing best-of-breed applications to this sector of the market, or to the emerging dot-coms and other high-tech startups.