ASPs Are Here to Stay, Reports ITAA

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ASP customers are happy and likely to continue using application outsourcing services, according to a report released today by the Information Technology Association of America (ITAA), an Arlington, Va.-based trade group that serves the IT industry.

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“While the name may change, the ASP model is here to stay. The outsourcing of the running of complex software is inevitable. The question is not ‘if’ but ‘when’.”

—Harris N. Miller
President, ITAA

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The report is based on interviews conducted from December 2002 through February 2003 with 14 ASP customers from a variety of industries. Participants cite the following benefits and reasons for choosing an ASP:

Freedom to focus on core business issues

Cost savings

Risk reduction

Customized solutions

Ability of an ASP to attract and retain highly skilled IT staff

According to the ITAA, each customer interviewed said it planned to renew its contract with its ASP vendor. Customers praised the capabilities of their ASP vendors to provide customized solutions that are always up and running at lower costs than if they were to run the software in house.

“While the name may change, the ASP model is here to stay. Customers in our report all found that the benefits to outsourcing to an ASP, such as freedom to focus on core mission and cost savings, far outweighed any tactical hurdles in the decision to outsource,” said ITAA President Harris N. Miller. “The outsourcing of the running of complex software is inevitable. The question is not ‘if’ but ‘when’.”

With the recent rash of ASP consolidations, you might conclude that there is still some cause of concern for those tied to the ASP sector. No so, says Miller. “Because the ASP industry relies on efficiencies of scale, the industry consolidation we have witnessed is to be expected. ASPs, like many IT vendors, have suffered from sluggish economic conditions and change adversity in recent years, but our report finds the model is sound and provides great satisfaction for customers,” Miller added.

One reason why the ASP model has not achieved faster adoption rates may lie with the customers themselves. Slowly, however, barriers to entry are coming down. Many companies interviewed pointed to internal tactical hurdles such as loss of control, retraining or eliminating workers, and sunk costs (i.e., money already invested in running software in-house).

Customers acknowledged that while outsourcing to an ASP would most likely save them money in the long term, the immediate impact could be that the in-house IT investment already made would be lost in the first year.

ITAA reports that its ASP Committee includes companies such as: Agilera, Appshop, BlueStar Solutions, Corio, IBM, ManagedOps (now Surebridge), MIRUS, netASPx, Oracle, SOFTRAX, The Mariner Group, US Internetworking, and WTS. Overall, the association consists of more than 400 corporate members throughout the U.S. and includes a global network of 49 countries’ IT associations.

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