Application Service Providers: Will They Succeed?

This article examines the likelihood of success for application service providers (ASP) drawing from the outsourcing literature, interiews with ASPs in the USA, and the experience of Bennett who has held leadership roles in ASP and ERP in South East Asia. This article proposes that application service providers (ASP) rent packaged software, predominantly over the Internet. It shows why organizations might employ the ASP model to manage their enterprise resource planning systems. Using a framework adapted from Lacity and Hirschheim, it demonstrates that the financial, business, technical and political reasons why organizations evaluate outsourcing can be applied to ASP model. While ASPs generally target the mid-market, large enterprises are also using ASPs to introduce new ERP modules. Potential users of ASP should regard the risks of outsourcing prior to entering into business arrangements. This examination concludes that there are strong financial and technical reasons for adopting the ASP model and therefore it has potential to succeed.