A hot acronym being batted around in IT circles these days is ASPs—application service providers. Dwight Davis, an industry analyst with market research consulting company Summit Strategies Inc., defines the ASPs role as “a practical method of distributing software functionality.” In plain English, ASPs are a logical and strategic way to harness software applications.

Summit Strategies, which is based in Boston, ranked Internet hosting as a sector with “tremendous change and opportunity.” Summit isn’t alone. A Gartner Group advisory says business-to-business trade will go from $43 billion in 1998 to $1.3 trillion in 2003. Forrester Research reports that the packaged applications rental market will grow to $21.1 billion by 2001 and account for 15 percent of new application licenses. And International Data Corporation (IDC) estimates the ASP market to be at $150 million now, but predicts it will jump to $2 billion in year 2003.

Why the disparity in numbers?

“It depends upon how you define ASP,” explained Ed McLaughlin, a partner at SVMedia, a Westfield, NJ, company that designs Web solutions for e-commerce companies. “Many people define us as an ASP because we offer Web-based hosting for applications.” But Forrester Research and others define ASPs as companies already providing application access online, such as database updating. IDC, meanwhile, defines ASPs as providers of robust applications.
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What exactly is an ASP?
While the acronym is hardly more than a year old, “the function has been around long before the word,” McLaughlin observed. “Technically, ASPs have been providing content management solutions to businesses since the Web began.”

There are two kinds of ASPs. “The first is a data-driven, Web-based application so businesses can maintain their Web sites,” McLaughlin said. “The second provides tools to businesses, such as the sharing of calendars, so workers in remote locations can work on the same project.”

The initial thinking was that only small companies could benefit from ASPs, because these firms couldn’t afford to make an investment in IT. But that’s no longer true, according to McLaughlin. “The decision to use an ASP is more determined by the size of a project rather than the size of the company,” he explained. “In a large company, using an ASP is a good way to avoid bureaucracy and get things done quickly. For a monthly fee, you have immediate access to a helpful tool, which may be just a blip on the project’s budget sheet. Time Warner New Media, for example, uses ASPs for that very reason.”

What skills are needed?
Davis sees a lessening of demand on the corporate side as companies depend more on outside service providers. “The job growth will be greater at the ASP level,” he said. “ASPs will be looking for the same skills companies use to manage IT.”

But there will also be new problems to handle. “Companies will be concerned that their data at the host company site is secure,” Davis added. “Right behind security is availability of data at high-performance levels. The data may have to be accessible not only on the Internet but over virtual private networks as well.”

Even though companies are cutting staffing costs by using ASPs, they will still need bodies to manage the ASPs so operations run smoothly around the clock. Depending upon the responsibilities, it might be part of another job or a job unto itself. Whatever the title, McLaughlin said the task requires a solid understanding of the technology provided. On the corporate side, knowledge managers may oversee the process by playing a liaison role.

“ASPs will need networking and object-oriented programming gurus,” said McLaughlin. “Uppermost, they’ll need people who understand client-server applications. They will also need customer service people to sell and support the software.”

How can you keep up with all the changes?
The best way to plug into the ASP market is to follow the leaders in the software and hardware markets and learn about the alliances and partnerships they’re forming. “Many of these partnerships are being cemented with ASPs,” said Davis, although they may not be calling themselves application service providers.

If your curiosity is piqued, read between the lines and sniff out the opportunities as they are happening.

Bob Weinstein’s weekly syndicated column, Tech Watch, is the first career column covering the exploding technology marketplace. It appears in major daily newspapers throughout the U.S.