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Applications for Rent

© Nazan Fathy

A new breed of intermediaries, the Application Service Providers, is redefining the IT landscape.

Application Service Providers (ASPs) host applications that clients can access on a rental or subscription basis over the Internet or other networks. In doing so, they offer a viable alternative to implementing more quickly and less expensively solutions such as enterprise resource planning, customer-relationship management, messaging and e-commerce.

The ASP market holds great promises. While estimates vary, it is clear that ASPs are paving the way of the future. Otherwise, established companies such as Origin, Oracle, IBM and Microsoft would not have tapped this emerging market.

Origin, a large provider of business and IT solutions for global corporations with headquarters in the Netherlands, U.S. and Singapore launched Overture last September. Overture includes ASP offerings in select geographic locations, initially Belgium, France and the Netherlands. For a fixed price per seat per month, customers can have access to a pre-assembled SAP R/3 suite of applications, hardware and connectivity through the Internet. The per-seat pricing also includes implementation, maintenance, user training, all required documentation and access to central help and support desks.

On its part, Oracle launched Business On-line (BOL) last month and became its own ASP. Network World reports that customers who license the Oracle Applications suite can run the software in the Oracle data center, with end users accessing the various programs through a Web browser. While Larry Ellison will not let other ASPs host Oracle applications, BOL is partnering with leading Independent Software Vendors (ISVs) to complement its current offerings.

Yet IBM and Microsoft are pursuing a different mix of strategies in this nascent market. Both giants have announced programs to get ASPs and ISPs on a solid footing through the use of their products and services. This includes Microsoft's downloadable deployment kits that guide ASPs and ISPs in implementing business application services and hosting collaboration services to Office 2000 users. It also includes IBM Service Provider Initiative, which targets ASPs, ISPs and ISVs with offerings such packaged services, consulting, education and technical support.

While the giants of the IT industry have started to enter the ASP space, the market is mostly made up of upstarts such as USinternetworking who pioneered the model. This makes the need for standard setting more acute. To fill this gap, Sun Microsystems Inc. launched the SunTone (SM) program, an industry effort to define and deliver service level guarantees for network-based services such as e-mail, e-commerce, and enterprise applications. Also, the ASP Industry Consortium is about to set up working committees to establish best practices for the industry.