Definition

"Application Service Providers are third-party entities that manage and distribute software-based services and solutions to customers across a wide area network from a central data center.

In essence, ASPs are a way for companies to outsource some or almost all aspects of their information technology needs.

According to ASPnews.com, ASPs are broken down into five subcategories:

• Enterprise ASPs -- deliver high-end business applications.
• Local/Regional ASPs -- supply wide variety of application services for smaller businesses in a local area.
• Specialist ASPs -- provide applications for a specific need, such as Web site services or human resources.
• Vertical Market ASPs -- provide support to a specific industry such as healthcare
• Volume Business ASPs -- supply general small/medium-sized businesses with prepackaged application services in volume.

ASPs may be commercial ventures that cater to customers, or not-for-profit or government organizations, providing service and support to end users. "  (Webopedia, 2000)

Advantages

• Reduction in operating and IS overhead costs
• Pay as use, low capital cost
• Computer upgrades needed less frequently
• Upgrades and program improvements provided automatically
• Organization can concentrate on more important areas
• Information access from outside locations
• Fast implementation
• May provide additional linked services such as customizable extranet

Disadvantages

• Reliability (including network)
• Lose control over critical function
• Need to change internal processes
• Security of information and processes
• Cost for network and to connect with existing applications
• No face-to-face communication; impersonal
• Requires contract negotiation and administrative competencies
• Difficulty and cost of switching later
• Files and databases located at ASP
• Dependent on ASP

Reference:  Application Service Provider. (2000, September 23). Webopedia. Available: webopedia.internet.com/TERM/A/Application_Service_Provider.html (September 23, 2000).

© Copyright 2000-2001 Raymond S. Kulzick. All rights reserved. 000923, 010528.