The market for application service providers (ASPs) in the U.S. is expected to grow to $13 billion by 2004, according to a new report released by The Phillips Group (www.thephillipsgroup.net), with most of the growth in the industry coming from large businesses using hosted applications for e-commerce.
Over the next five years, the ASP industry will grow from $1.1 billion in 1999 to $13 billion in 2004, says The Phillips Group study. E-commerce will become the most prevalent hosted applications, representing about 52 percent of ASP revenue by 2004, compared to just 28 percent in 1999.
One of the most surprising findings in the study was the extent to which large companies plan to use ASP services.
"ASPs presently view small and mid-sized businesses as the primary market for their outsourcing services," said Terry White, lead analyst for the study. "The assumption has been that these smaller businesses are more likely to outsource the development and hosting of various applications because they don't have the IT resources that the larger enterprises have."
But, the study revealed that about 44 percent of large businesses already outsource the hosting of their web site, and more than 60 percent indicated that they use outsourcing as one method for obtaining software. White believes that for the ASPs to continue to penetrate the large enterprise market, the hosting companies will have to demonstrate strong customer service and support, as well as offering strenuous SLAs.
