The case against ASPs

The director of the Great Plains unit within Deloitte Touche Tohmatsu, Russell Weaver, believes the ASP model is not such a cost-effective option.

The director of the Great Plains unit within Deloitte Touche Tohmatsu, Russell Weaver, believes the ASP model is not such a cost-effective option.

“Personally, I think it’s a dead duck. If you look at the costs of hardware infrastructure, telecommunications bandwidth communications, software licences and implementation costs, when you add it all up it costs more than the application.”

Weaver says that once you move beyond small businesses the demands of the client require a customised solution that ASPs can’t provide. “For an ASP model you’re looking at an out-of-the-box solution.”

Ernst & Young’s Australian national director of e-commerce, Mark Runnalls, says the ASP market has a long way to go.

“The supply and demand of the market is out of balance, I don’t think there are many profitable ASPs at the moment. I guess some of the problems that have occurred have shown that there are less companies interested than initially thought. You’ve only got to look at the stories in the press of companies who’ve gone to an ASP for all their applications.”

Runnalls says privacy, security and integration remain the biggest hurdles facing ASPs. The confidential nature of finance and accounting data means these factors have to be confronted otherwise businesses will be reluctant to use an ASP for such applications.

“I think the ASP market does have a future, but at the moment we are only at stage one.”

An IDC report released last year titled The ASP market in ANZ estimated the value of the Australia/New Zealand ASP market in 1999 at $US5 million. The report estimated the market would grow at a compound growth rate of 87% to reach a market value of $US116 million by 2004.

Following the dot-com meltdown in the US, whether these figures pan out is anyone's guess. An ASP end user survey released by Gartner Dataquest in December last year looking at the Asia-Pacific suggested the regional ASP market had been overhyped. While the ASP model may be the most cost-effective option for certain businesses, subsequent feedback suggests it doesn’t suit all.

The Gartner survey said that virtually every service and enterprise resource planning (ERP) vendor in Australia was marketing ASP services, highlighting the fact that ASP supply is currently outstripping demand. While some businesses get an ASP to provide a complete business solution the market has not yet reached the stage where ASPs can profitably market single applications.

However, Gartner Dataquest’s survey concluded that as e-commerce develops, the ASP market will as well. Gartner believes ASPs will prove their worth in the long run.

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