One of the most interesting behind-the-scenes
business models that the Web has created is called
the ASP, or Application Service Provider. ASPs are
a completely new way to sell and distribute
software and software services.
Although ASPs were possible before the advent of
the Web, the Web makes them so easy to create that
they have proliferated hugely in the last several
years.
The ASP model can be extremely appealing to
businesses especially small businesses and
startups because it can drastically lower the
costs of software and services.
ASPs tend to be made fairly complex and
confusing in the media, but people have been using
forms of the ASP for centuries. By looking at one
of these existing models and seeing how simple
they are, you can gain a great deal of knowledge
about Internet ASPs.
The terms "ASP" and "Application Service
Provider" are applied specifically to companies
that provide services via the Internet. In most
cases, the term ASP has come to denote companies
that supply software applications and/or
software-related services over the Internet.
Here are the most common features of an ASP:
- The ASP owns and operates a software
application.
- The ASP owns, operates and maintains the
servers that run the application. The ASP also
employs the people needed to maintain the
application.
- The ASP makes the application available to
customers everywhere via the Internet, either in
a browser or through some sort of "thin client."
- The ASP bills for the application either on a
per-use basis or on a monthly/annual fee basis.
The ASP model has evolved because it offers some
significant advantages over traditional
approaches.
Here are some of the most important advantages:
- Designed for small businesses and startups
taking advantage of low cost of entry, and an extremely short setup time.
- The pay-as-you-go model is often significantly
less expensive for all but the most frequent
users of the service.
- The ASP model, as with any outsourcing
arrangement, eliminates head count. IT headcount
tends to be very expensive and very specialized
(like pilots in the airline example), so this is
frequently advantageous.
- The ASP model also eliminates specialized IT
infrastructure for the application as well as
supporting applications. For example, if the
application you want to use requires an Oracle
or MS-SQL database, you would have to support
both the application and the database.
- The ASP model can shift Internet bandwidth to
the ASP, who can often provide it at lower cost.
One thing that led to the growth of ASPs is the
high cost of specialized software. As the costs
grow, it becomes nearly impossible for a small
business to afford to purchase the software, so
the ASP makes using the software possible.
Another important factor leading to the
development of ASPs has been the growing
complexity of software and software upgrades.
Distributing huge, complex applications to the
end user has become extremely expensive from a
customer service standpoint, and upgrades make
the problem worse.
In a large company where
there may be thousands of desktops, distributing
software (even something as simple as a new
release of Microsoft Word) can cost millions of
dollars. The ASP model eliminates most of these
headaches.
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