Are you a small to mid size company who finds application packages too expensive? Are you a software company looking for innovative ways to promote your software and/or generate revenue? Application Service Providers (ASP’s), which are predicted by the International Data Corporation to reach revenues of $2 billion by 2003, may be the solution for you. Driven largely by Lotus Development, rentable applications, or ASP’s have made a brave entrance into the E-Business arena.

Application Service Providers provide businesses with an alternative to buying software. Instead of acquiring a copy of a Windows-based application, a user logs onto an ASP site, and uses the software, thereby sharing the costs of an application. ASP’s provide customers with alternatives to building and managing internal information technology operations, and help enterprises drastically reduce their total cost of ownership (TCO). Enterprises of any size can utilize the services of ASP’s to offload costly network and server-based application purchasing and management.

Historically, there has been a shift from centralizing everything on mainframes and equipping every office desk with a terminal, to decentralizing everything by placing powerful PC’s on every desk. Now, the industry has come full circle by centralizing once again. This time, each desktop has a web browser. This trend, commonly referred to as Weblications, where legacy applications run off a central Web server and are delivered inside a browser, is the driving force behind ASPs.

The technology behind ASP involves a server. When users log on, the Windows based software application they activate runs entirely on the ASP server's high-performance processors. Only the "user interface" is sent over the Internet to the user's remote workstation.

Because they run off the server, these applications execute at very high speed over low-bandwidth connections (minimum 28.8 Kbs) and require minimal RAM and CPU on the part of the user. Regardless of whether the user is using a 486 or Pentium III Processor, he will experience a Windows desktop at Pentium-level performance. The ASP, as the host, handles upgrades, system security and tech support from a central location away from the end users' offices.

Companies, organizations or even individuals, through their websites, can offer access this service to their user-base. Called portals, they provide the Web interface, and the Application Service Providers supply the technology to registered users to gain access to these applications. Thus, software companies can provide their customers another avenue to use their applications, thereby increasing their revenue stream.

The payment process is simply based on a pay-as-you-go, per-user per-minute philosophy. Both the portals and their customers pay usage fees based on the number of users accessing the ASP through the portal and the time these users spend on a given application. An ASP will typically provide each portal with a monthly report invoicing the portal for the service.

BENEFITS. The benefits to ASP’s are manifold. Users do not have to buy expensive applications which they may use only periodically. Users have instant access to a wider selection of software. Installing, maintaining, and upgrading software applications is left up to the Application Service Provider. This ensures every desktop is running the latest version of a company-wide application. Using ASP’s frees up valuable space on the user's hard drive, normally reserved for applications. Users have universal access to applications from anywhere, any time via the Internet and a web browser. For users who are behind a firewall, additional configuration can be provided by the service provider.

Although not as extensive as the list of benefits, there are some negative aspects of ASP. A significant amount of bandwidth is needed to move application and content data between centralized servers and far-flung desks, and safety and security of outsourced corporate data has yet to be demonstrated, according to Jeffrey Harrow, senior consulting engineer for the corporate strategy and technology group at Compaq. As well, since ASP’s are a relatively young breed, customers are relying on unproven providers and may be subject to random price fluctuations. Perhaps most importantly, the applications provided by ASP’s are currently limited to Windows based applications. This excludes all those computers running other operating systems.

Smaller Companies Benefit from Speed, Efficiency and Scalability. With their wide breadth of applications, from enterprise resource planning (ERP), sales force automation, Web hosting and E-Commerce, ASP’s can benefit any organization. With their philosophy of essentially pooling customers’ rental money to buy access to software and hardware that may not be affordable independently, ASP’s provide a valuable benefit to smaller companies. With a shift to customer based relations, the scalability of application service delivery promises speed, efficiency and availability to anyone in the E-Commerce industry, and not just to those who can afford expensive applications.