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Case Study: Change Management Made Easy with HP. Learn how HP provided a smooth transition for the IT challenges at Fleetwood when they made the effort to implement new technology upgrades.


Anatomy of an ASP – Three Strands Of Development
By Phil Wainewright

June 6, 2000

ASPs have emerged from three separate traditions …

In its first report, Packaged Software Rental: The Net’s Killer App (“Killer“), first published November 1998 and revised in March 1999 and again in January 2000, outlined the origins, shape and directions of application services, and identified three separate trends from which ASPs are emerging.

  • From the IT services industry comes a trend towards selective outsourcing
  • Among ISPs the relevant trend has been towards application hosting
  • Finally, Internet-based enterprises have begun to offer online applications as part of a phenomenon this report calls portal computing
Selective outsourcing

The practice of outsourcing has a long pedigree in the IT services industry. In recent years, it has evolved to provide increasing levels of granularity in the choices offered to customers. Instead of handing over their complete IT infrastructure to an outside provider, organisations have selectively outsourced specific parts of IT. Initially, these were base level infrastructure components such as data networking. Systems services such as desktop or network management came next. Then came infrastructure applications such as messaging. Now the practice has reached the top tier of the computing stack and embraces the user applications themselves. What the IT services industry knows as application outsourcing and application management is increasingly indistinguishable from what ASPs deliver. The ASP model adds fixed, per-user pricing, often levied in the form of a monthly subscription.

Early ASP startups such as USinternetworking, Corio and Futurelink fall into the selective outsourcing category, where they find themselves now joined by established IT and professional services organisations such as EDS, IBM Global Services and KPMG (in its joint venture with Qwest). More recent recruits to this category include computing resource providers such as StorageNetworks and subscription computing providers including CenterBeam, and everdream.

Application hosting

Internet service providers (ISPs) have always been ASPs to the extent that the provision of hosted mail and web servers is an application service. Over time, the ISP industry has divided between those who provide access and connectivity services, and those who offer hosting services. The latter, particularly as they move into sophisticated e-commerce, messaging and other complex web hosting services, are effectively ASPs. They have been joined by a new class of application software vendor, which uses the hosted model to provide Internet-based applications and services. Although the Internet industry uses the term application hosting, it differs only in name from other forms of application services.

Managed hosting providers include examples such as Concentric Networks, Digex and Navisite. Vendors who act as e-business or infrastructure service providers include Akamai, CyberSource, eGain and

Portal computing

Web sites started out as Internet destinations that offered only static content, mainly words and images. Today, information sites have became portals and, seeking the ‘stickiness’ that keeps users returning to their site, they have added applications to create dynamic, interactive experiences. Meanwhile, a new generation of software vendors are bringing their applications to market as web-based services, accessed directly over the Internet.

These separate trends converge in the emergence of specialist business-to-business portals serving either specialist business needs or vertical industry markets. This is the advent of portal computing – the provision of sophisticated online applications alongside relevant content within a portal, catering to the specific needs of a special interest group.

Hundreds of enterprises, most of them recent startups, fall under the fast-expanding portal computing umbrella. They include net-based application vendors such as Agillion, NetLedger and; Internet business services such as ELetter and Employease; and a wide range of vertical industry portals, online trading exchanges and enterprise extranets. There is significant overlap in the final three categories, encompassing ventures as diverse as, Healtheon/WebMD and VerticalNet, along with extranet, online marketplace and customer portal projects by the likes of Ford, Shell and Wells Fargo Bank.

All three converge

Although each of these separate strands emerges from different historic roots, each takes advantage of the same technology enablers to deliver applications from an online data centre to a community of users. They are all converging on the same ASP model. As they do so, more and more of them become identified as ASPs, even though they may not originally have seen themselves in this light.

The convergence is evident as subcategories such as application outsourcing and application server hosting, or hosted e-business services and net-based application vendors, develop significant overlaps. Some providers combine elements from all three strands. As the year progresses, the divisions will become increasingly blurred as the separate strands intertwine still further.

This article is part of an edited extract from the special report, “Anatomy of an ASP: Computing’s New Genus”. To see details of the full report and download the complete extract in printer-friendly PDF format. , click here>>

Phil Wainewright founded in 1998 and is the publisher of Loosely Coupled. He can be contacted at

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